Espy acquired its name from Josiah Espy, who in 1775 bought a tract of three hundred acres from the Penns, which included the present site of the town. Soon afterwards his son George built a two-story log house on a spot about twenty yards from where the canal later ran, and near the center of the present town. He built the house in 1785 and occupied it until 1810, when he removed to Crawford County. In 1800 he laid out the town into lots, which he sold to various persons, all of whom did not occupy them. He gave the name of Liberty to the settlement, but later on the residents adopted his name, which was fixed in 1828 by the establishment of a post office here with that title. At that time there were fourteen log houses and twelve frame dwellings in the place.
Among the first residents of the town were John Edgar, Alexander Thompson, John Kennedy, Samuel McKamey, a Mr. Hinkle, John Haverman, a Mr. Miller and Frederick Wornian. The first frame house was built of lumber sawed at the Elias Barton sawmill in Hemlock Township and was owned by John Shuman. The first hotel was built about 1805 by John Kennedy, rebuilt in 1853 by Henry Trembly, and later owned by Boyd Hartzell as the "Hotel Espy," but has no license. The first brick house was built in 1845 by John Hughes. In 1826 the people of the town were supplied with water from three wells at the hotel and the houses of John Webb and Philip Miller, the latter at the corner of Main and Market Streets.
During the early history of the town the bog in the rear between the hills and the settlement was almost impassable, a log bridge called the "Indian Path" being the only method of passage towards Light Street. Over this morass a corduroy road was laid in 1815 by John Hauck to haul ore over from the ridge to his furnace at Mainville. This bog extends from the brook near Almedia to the edge of the corporation line of Bloomsburg and has for years been a waste spot. However, in 1907 a company was formed to exploit the peat deposits and in 1913 was reorganized by the Espy Humus Fertilizer Company, of which Dr. Ira R. Wolfe is president, M. W. Wolfe treasurer and F. E. Lord secretary and manager. The deposits of peat, which are twelve feet in depth, are dug, dried by steam and pulverized, being then shipped to different plants over the Union to be converted into fertilizer by admixture with other materials. Thus a worthless spot had been developed into a source of almost unlimited wealth.
Probably the palmy days of the town of Espy were during the operation of the canal. About 1834 the first boat for use on the canal from this point was made by George and Thomas Webb, and until 1873 canalboating was a prominent industry of Espy townspeople. Boatyards were operated by Barton & Edgar, Kressler & Vansickle, Fowler, Tronsue & McKamey, all of which were later absorbed by the Pennsylvania Canal Company. The latter firm continued to operate their yards until the canal was abandoned, and in 1900 the boatyard was destroyed, together with the Milnes gristmill beside the canal basin.
While the boatyards were in operation there were three planing mills in Espy, two owned by Thomas W. Edgar and one by D. Snyder & Co., respectively. There were also a tannery, a pottery, a distillery, a vinegar factory and a brickyard. All of these have passed into oblivion.
The Atlas Manufacturing Company, for the manufacture of a special design of stepladder, was formed in 1881, by James and William J. McCormick, who ran it till 1884 and then removed to Danville.
The first merchant in Espy was William Mann, who continued in business from 1816 to 1818. Between 1820 and 1850 stores were operated by Worman & Swaby, Miles Bancroft, Cyrus Barton and John Petricken. The volume of business in the town at one time was so great as to support a private bank, of which William Milnes was the owner and John V. Logan cashier. The storekeepers were: H.C. Ruckle, T.W. Hartman, F.P. Pursel, N. Reichert, K.S. Creasy, W.E. Hummel.
The old planing mill on the line of the Lackawanna Road was purchased in 1910 by George B. Markle, of Hazleton, who also owned the John Robinson farm. He spent $50,000 and developed a large poultry business, making a specialty of squabs, hundreds of which he shipped each week to markets in the East, using the old mill as a cold storage house. The place was called "Uncle John's Farm" and under the management of George Denby.
The citizens of Espy always took pride in the beautifying of the streets of the town. The first residents imported the Lombardy poplar and the weeping willow, while later lot owners added the maples and other shade trees to the list. Travelers on the electric line of the North Branch Transit Company had ample opportunity to admire the results of the efforts of the citizens to make the town attractive.
The public buildings of Espy consisted of a high school, three churches and a frame Odd Fellows hall, which replaced the town hall, burned in 1889.