The town was founded in 1823 on land owned by United Empire Loyalist Thomas Smyth. With the construction of the canal, Smiths Falls became easily accessible for shipping, and in 1854 it was incorporated as a village.
Several manufacturers are based in Smiths Falls, perhaps the most well-known being Hershey Foods. Its location on the Rideau Canal, with several large lakes in the vicinty, makes it a tourism hot spot.