The village name is Anglo Saxon in origin, and means 'fallow-coloured woodland clearing'. It was recorded in the Domesday Book of 1086 as Falelie. There are two other places in the country called Fawley.
Sir Bulstrode Whitlock, a prominent Member of Parliament in Cromwell's day was from Fawley. In 1642 he allowed soldiers fighting in the English Civil War to stay at the manor in Fawley, however they were quite raucous in their behaviour, and they completely destroyed the contents of the house. In 1684 the house was completely redesigned, following a design by Sir Christopher Wren.
The parish church, which was rebuilt in 1748, is dedicated to St Mary the Virgin.