When the first white settlers came from Connecticut to the area known as the Blue Mountain country, they settled northwest of the present village. The Liberty area of New York State provided 303 men who fought in the Revolution. Some of the oldest remains left in the town are stones in the outlet of Revonah Lake that were probably placed there in 1797 for the purpose of building the first sawmill in the area.
The land was cleared of its dense hemlock forest for farming, and an early local industry was tanning, which continued to be important through the Civil War era. Later industries were dairy farming and catering to summer residents, which gradually led to the founding of the large hotels and a booming resort industry.
Around 1900, the Loomis Sanatorium was established for the care of tuberculosis patients, and Liberty became a center for tuberculosis treatment until cures other than fresh air and rest were found.
Liberty, with an abundance of rural beauty and near the metropolitan New York area, returned to its economic dependency upon tourists and summer season residents. As the years went by, different settlements evolved into the village and hamlets that exist today.
Within the confines of the Town of Liberty today are the Village of Liberty and the smaller hamlets of Ferndale, Parksville, Swan Lake, and White Sulphur Springs. The village, incorporated in 1870, is by far the largest of the town's communities, with a current population of 3,975.
Liberty, in the heart of the Catskills resort area, hopes to revitalize its once flourishing resort industry through preservation of its historic resources. The village has one of the most intact downtowns in Sullivan County, and is working to develop its downtown as a heritage tourism destination through its 2002 Main Street Revitalization Plan, which seeks to save and capitalize on its historic commercial architecture.
Liberty has partnered with Cornell University for a year-long study leading to a long-term economic development plan for the commercial district. The village is establishing a Liberty Community Development Corporation, and has been awarded a grant to survey the downtown and determine historic district boundaries.
In addition, the Liberty Museum on Main Street hosts the annual Sullivan County Preservation Conference, and runs an annual bus tour. Grassroots efforts to improve the Main Street corridor recently have focused on the Town and Country building, a historic landmark used over the years for retail, entertainment, and meeting hall purposes.
Cornell University preservation students and alumni conducted their 2004 work weekend in Liberty, restoring the 1953 Town and Country building's Art Moderne façade and neon sign. The village hopes to sell the prominent building with preservation covenants attached for renovation as an antiques market.
Designated a Preserve America Community in January 2005.