The City of Valley Mills is on State Highway 6 near the Bosque River eleven miles  south of Clifton and twenty-four miles north of Waco in southwestern Bosque County. It was named for a flour mill established on the banks of the Bosque River in 1867 by Dr. E. P. Booth and Asbury Stegall. In 1881 the Gulf, Colorado and Santa Fe Railway laid tracks a mile south of the community. Merchants, hoping to benefit from the railroad, began moving their stores to  the tracks. On February 27, 1882, a cyclone hit the new town site, destroying a large number of buildings. Nevertheless, the remaining residents from the community's original site moved across the river and rebuilt their homes. Thus, by the end of 1882 Valley Mills had a new site which extended into McLennan County. Dairy farming and stock raising were the principal industries of the community. By 1900, however, the railroad and the nearby Chisholm Trail had made Valley Mills a prosperous retail and trading center for Bosque and McLennan counties. The community's population reached 855 by 1925. Like many rural Texas communities Valley Mills declined during the 1930s. Following World War II, however, as farm prices increased and ranching prospered, the economy grew, and the population, which had declined to 803 by 1940, increased to 1,037 by the mid-1950s. During the next three decades Valley Mills maintained its position as a leading retail market and shipping point for Bosque and McLennan counties. In 1984 it had a newspaper, a municipal airport, more than twenty-five businesses, several dairy farms and ranches, and a population of 1,236. A new school was opened in 1988; it and four churches were the social centers of the community. In 1990 the population was 1,085. The population was 1,123 in 2000.