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West Milford started out as New Milford in what was then western Bergen County in the 18th century, having been settled by disenchanted Dutch from Milford, New Jersey (later renamed by the British as Newark). These same Dutch also built a town of New Milford in eastern Bergen County. When both New Milfords applied for post offices in 1828, a clerk in Washington, D.C.

is said to have approved the other application first and assigned the name "West Milford" to the New Milford in western Bergen County in order to distinguish between the two locations.West Milford became a municipality by an act of the New Jersey Legislature on March 10, 1834, when it was formed from the westernmost half of Pompton Township, while the area was still part of Bergen County.

On February 7, 1837, Passaic County was created from portions of both Bergen County and Essex County, with West Milford as the western end of the newly formed county. The township was named for Milford, Connecticut.There are old place names in the township including Postville, Utterville, Corterville, Browns, Awosting, Echo Lake, Macopin, Charlottenburg (now under the Charlotteburg Reservoir, the community was named after Queen Charlotte), Clinton (or sometimes called Clinton Furnace, now under the Clinton Reservoir, and the furnace still stands), Moe Mountain, Oak Ridge (a nameplace, but town is under the Oak Ridge Reservoir), Newfoundland, Apshawa, New City, and Smith Mills.

Newfoundland is divided by the Pequannock River, which divides Passaic and Morris Counties; a small part of Newfoundland lies within Jefferson Township. A large part of the township, including the New City Village area, is reservoir property owned by the City of Newark in Essex County for its water supply.

Prior to the Second World War, the township was a resort area with trains coming from New York City to stations at Charlotteburg, Newfoundland, Oak Ridge in the south and Hewitt (also known as Sterling Forest station) and Awosting in the north. Railroad service in the south was from the New Jersey Midland starting around the 1850s and in the north around the 1870s from the Montclair Railroad, out of Montclair, New Jersey and later the Erie Railroad (before their merger with the Lackawanna Railroad). Greenwood Lake is an interstate lake approximately 9 miles (14 km) long and covering 1,920 acres (780 ha), lying in both West Milford and Greenwood Lake, New York, across the New York state line.

It was originally called Long Pond. It was dammed up to increase the size of the lake for water power down stream. During the resort era, several steamboats operated on the lake, the most famous and grand was the two deck steamer, Montclair. These steamboats met the trains and took passengers to the various resorts around the lake in both states.There is a seaplane area on Greenwood Lake, a few large marinas and lakeside restaurants with docks.

A public airport called Greenwood Lake Airport is located just south of the lake on top of a mountain ridge and has two landing strips; one is long enough to handle small jets. There is one private airport in the township on a private estate. After World War II and for the next 20 years the area underwent a major change from a resort area to year-round residences.

Before there were year-round houses, the summer residence of Cecil B. DeMille was West Milford. Road maps of the 1950s showing the population on the backside said 2,000 winter and 10,000 summer.In 1972, Warner Brothers opened up a wildlife theme park called Jungle Habitat. This park consisted of a drive through safari and a small park with various shows.

Initially, this brought huge tourist revenue to the township. Shortly after the park opened, a tourist being driven through the safari in a taxi was attacked by a lion on October 19, 1972, bringing negative publicity to the park. The park was plagued by problems, including reports of dangerous animals escaping into West Milford.Jungle Habitat was a mixed blessing due to the amount of summer and weekend traffic into this rural area made up of small two lane roads.

Jungle Habitat wanted to expand and become a huge amusement park, but residents concerned with excessive traffic voted this proposal down in 1976, which resulted in an abrupt closing and exit. Some of the animals in the wildlife park were subsequently moved to the then-recently established drive through safari at Great Adventure in Jackson Township.

The former site of Jungle Habitat in recent years has become a location for various Township activities such as the annual Fourth of July Fireworks display and is a popular regional mountain biking destination. Jeremiah "Jerry" Goodfellow, a white German shepherd and the senior canine member of the New Jersey Search and Rescue was inducted into the Animal Hall of Fame in 2009.