Jonesborough was founded in 1779, seventeen years before Tennessee was granted statehood. It was named after North Carolina legislator, Willie Jones, who supported North Carolina's westward expansion over the Appalachian Mountains.
The town was originally a part of North Carolina. In 1784, Jonesborough was one of the towns that attempted to create a new state called the State of Franklin, named after American founding father Benjamin Franklin. The State of Franklin, however, was never recognized by Congress, and was re-claimed by North Carolina by 1788.

Jonesborough is often considered to be the center of the abolitionist movement within the states that would join the Confederacy during the American Civil War. Elihu Embree printed his publication, The Emancipator, from the town of Jonesborough. Circulation began in 1820, making The Emancipator the first American periodical to be dedicated exclusively to the issue of the abolition of slavery. While Tennessee would later join the Confederacy, most East Tennesseans had Union leanings, which is perhaps not surprising given the fact that East Tennessee was not suited to large-scale agricultural production, such as cotton, and very few people in the region other than the very wealthy owned slaves.

In 1788, future U.S. president Andrew Jackson spent several months in Jonesborough awaiting a caravan. Jackson lodged at the cabin belonging to Major Christopher Taylor, located about a mile outside of town. In 1974, this cabin was removed from its original spot and reconstructed in the town's park. According to local legend, Jackson's ghost occasionally appears in the cabin's vicinity. The ghost supposedly walks up to the front door and disappears into the building. The ghost has also been seen walking down the street, in the direction of the old courthouse.