Paeonian Springs, Virginia was formed in 1871 with the arrival of the Washington and Ohio Railroad (later Washington and Old Dominion). The village lies on the first north-south crossroads connecting highways 7 and 9 and is located roughly four miles northwest of Leesburg, Virginia.

On 31 January 1889, Theodore Milton (24 January 1848-31 July 1906) formed The Paeonian Springs Company, with the goal to develop the springs on his land and to sell bottled water. The company created and operated hotels and boarding houses for summer tourists. In the 1890s The Paeonian Springs Company advertised the town as an ideal resort. The attractions of the town were the water, mountain air, and magnificent scenery. The town was popular in the summer with people from Washington D.C. coming out by train. By 1912, there was a well developed tourist industry with a boardwalk lined with stores in town leading to the train station and boarding houses.

In the 1920s, tourism started to decline. Because of the Pure Food and Drug Act passed in 1906, The Paeonian Springs Company could not make health claims about the water and closed their commercial bottling operations. In addition, the discovery of antibiotics decreased fear of disease in cities during the summer months, and increased mobility from cars gave people more vacation and travel options.

In the 1960s, Paeonian Springs, residents started revitalizing their homes and buildings to help show the importance of the town's heritage.