The rich soils of the Blackland Prairie and the water provided by Bear Creek attracted settlers to the area in the mid-1850's. The St. Louis, Arkansas and Texas Railway laid tracks through the area in 1888.

The community adopted the name Lavon in honor of Lavon Thompson, the son of E.C. Thompson, who operated the town's post office, established in 1888.

The flag stop, on what became the St. Louis Southwestern Railway of Texas in the early 1890's, served as a commercial center for farmers and increased the population of Lavon from an estimated twenty-five in the late 1880's to 300 by 1910.

In 1913 the Richard Royal chapter of the Daughters of the American Revolution marked the grave of John Abston, who was buried near Lavon. Abston fought in the battle of Kin's Mountain during the war, and later moved to Texas.

The population of Lavon hovered near 200 through the 1930's and 1940's, and in 1940 five businesses served its residents. These population and business figures varied only slightly between 1940 and 1980, despite the construction of Lavon Lake in 1952-53, two miles west of town.

The lake did, however, bring boaters, fishermen, and picnickers to replace farmers as the most frequent visitors to the community. In 1980, the newly incorporated Lavon had one business, serving 306 residents.

During the late 1990's and early 2000's, a number of smaller housing developments served to approximately double the population of Lavon, and brought the city's first new businesses in decades;  an auto repair facility, a quick-stop grocery / gas station, a branch bank, barbecue restaurant, and others.