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Hamilton was established by settlers who arrived from Tennessee, Kentucky, and Virginia to establish the Alabama Territory in the middle of the 19th century. It was built on land that was once used as a "hunting ground" by the Chickasaw. Although the city was originally called "Toll Gate", it was later renamed in honor of Captain Albert James Hamilton who represented Marion County in the state legislature during the sessions 1869-1874, and 1875. Forty acres of Captain Hamilton's land were donated to the town. To help pay for the building of the courthouse, the forty acres were divided into lots and then sold. In 1881, the Toll Gate community was elected to become the next county seat. By 1883, the Marion County courthouse in Pikeville was no longer functional. The town's name was changed to Hamilton after the courthouse moved from Pikeville and Tollgate. The newly constructed county courthouse was set on fire in March 1887. It was rebuilt again with wood but was replaced with native sandstone in 1901.
Union forces made frequent visits to the town during the Civil War in search of horses and goods. Wilson's Cavalry, south of Tollgate, destroyed the plantation of the Helvingstons at the Military Ford by setting it ablaze.