Jim Thorpe was founded in the 1816 as Mauch Chunk. It was split into two towns-East Mauch Chunk and Mauch Chunk. The economic foundation for the town was the nearby discovery of coal, which gave Carbon County its name. In 1818, Josiah White, along with his business associates of George Hauto and Erskine Hazard, were granted use of all the water to the Lehigh River, for the purpose of transporting coal from the mines to the downriver steel mills. After surveying the land around Mauch Chunk, a railroad was built from Summit Hill to Mauch Chunk. It was later known as the Switchback Railroad. They formed two companies, the Lehigh Navigation Company and the Lehigh Coal Company. The reason for two different companies was that one group of investors had no faith in the coal business and the other group of investors had no faith in river navigation.
Asa Packer, the railroad magnate and founder of Lehigh University, invested heavily in the railroad industry in the area, and made his home in Mauch Chunk. The mansion, which was left to the city is now one of the areas tourist attractions. Still in its original state and not restored to any great degree, it gives a view of how the upper class lived in the 1800's.

Although not as large as Scranton, both towns thrived during the nineteenth century during the Industrial Revolution, with it's railroading, canal trade, and coal shipping. Along with Asa Packer, several millionaires made their homes on Broadway, the main street in downtown Mauch Chunk. The area became a popular summer resort, bringing in thousands of people. During this period, in the late 1800's, Mauch Chunk was known as "the Switzerland of America'" and ranked second only to Niagara Falls as a honeymoon resort. Several presidents and many celebrities were among the many visitors, and the town had as many as nine hotels at one point, with the Inn at Jim Thorpe and the Hotel Switzerland among the most prominent.

One of the major attractions was the Switchback Railroad, which was converted to passenger use and provided a thrilling ride from Summit Hill to Jim Thorpe and back again using natural gravitational forces. It was considered one of the first roller coaster -style attractions. Unfortunately, this railroad is no longer in use, having fallen into disrepair, but the Switchback Railroad Preservation Society is working to rebuild this historical attraction.

Due to its geographical location along the Lehigh River, natural flooding disasters occurred regularly, adding up to millions of dollars and lost lives over the past 150 years. Major floods occurred approximately every 20 years, with the floods of 1859 and 1862 being especially devasting. There have been six major floods since 1900, with the most severe in 1955. To prevent further flooding, Mauch Chunk Lake was developed in 1965, four miles west of downtown Jim Thorpe, by damming up a portion of Mauch Chunk Creek. This has become a popular recreation area for local residents.

With the decline of coal mining and the railroading industry after the Great Depression, the two towns slowly began to decline. Unemployment increased, businesses closed and the overall population began to decline as the younger generations began to move out of town. By the early 1950's, the towns of Mauch Chunk and East Mauch Chunk were struggling to stay economically feasible. Spearheaded by Joe Boyle, editor and co-publisher of the Mauch Chunk Times News, the local citizens started an economic development fund, contributing a nickel a week to help the depressed communities.

It was during this time that the famous athlete Jim Thorpe passed away in a Philadelphia hospital. Mrs. Thorpe attempted to get the state of Oklahoma, where Jim Thorpe was born, to erect a suitable memorial, but they declined. She heard about the efforts of the citizens of Mauch Chunk and was impressed by their community spirit. She visited the towns and asked for assistance. A group of local citizens used this opportunity to suggest that the two towns end their rivalries and come together as one community, naming the town in the honor of Jim Thorpe, and building a memorial to the athlete. In two referenda, the towns voted in favor of the proposal and in February of 1954, the body of Jim Thorpe was transferred to its final resting place in a mausoleum on the east side of town along Route 903.

The resulting publicity helped Jim Thorpe over the past twenty-five years as the town slowly transformed itself into a tourist and cultural area, with it's quaint antique shops, train rides, and restored brownstone that house the many businesses. It rescued itself from a fate that has befallen many of the old coal mining towns in the area, and has switched from an industrial economy to a tourist economy. Almost every weekend, you can find many visitors touring the shops, buildings and streets of the town.