By 1869, Belfountain was a village with a population of 100 in the Township of Caledon, County Peel. It was established on the Credit River. There were stagecoaches to Erin and Georgetown. The average price of land was $20.

In 1973, Caledon acquired more territory when Chinguacousy dissolved, with most sections north of Mayfield Road (excluding Snelgrove) transferred to the township.

Caledon inherited the name from Caledon Township of Peel County, Ontario, in 1974, which was likely named by settlers like Edward Ellis, who came from the area around Caledon, County Tyrone, now in Northern Ireland, or by public voting.

In 1974, Peel County's 10 municipalities became the Region of Peel's 3 municipalities. The Town of Caledon was created from the villages of Bolton and Caledon East, the townships of Albion and Caledon, and the north half of Chinguacousy.