​The land which ultimately became the Town of Sheridan was initially inhabited by Native Americans.  The Treaty of Big Tree signed in 1797 moved the Seneca Indians to the Cattaraugus Reservation and opened the area to speculators, followed quickly by settlers from the east.  On August 30, 1804, Francis Webber, William Webber, and Hezadiah Stebbins made purchases of land in Township 6, Range 11 from the Holland Land Company.  In subsequent years, more settlers followed.  In 1827, the town was formed legally by taking 32 lost from the Town of Pomfret and 35 lots from the Town of Hanover.  Early publications credit Nathaniel Gray, thought to be a great admirer of the poet, playwright, and politician Richard Brinsley Sheridan, with promoting the name.

Agriculture became the major industry in the Town.  For many years, Sheridan was known for its production of fruits and vegetables, especially grapes.  The raising of sheep and horses was another profitable venture in the 1800s.

Situated on the shores of Lake Erie, Sheridan was home to at least 26 ship captains who sailed the Great Lakes in the 1800s and early 1900s.  The first to be noted, Capt. Zephaniah Perkins, was well-respected.  In 1815, Haven Brigham built the Kingbird, a 40-ton schooner, for Perkins.

Sheridan is still primarily agricultural with several fresh fruit and vegetable stands, vineyards and wineries, and greenhouses producing seasonal flowers and plants.  If is also the home of several small businesses with some larger corporations on Progress Drive.  The Chautauqua County Airport at Dunkirk is located in the Town of Sheridan, as is the lovely retirement home St. Columban's -on-the-Lake.