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In 1750, Dr. Thomas Walker of Virginia publicized the location of Cumberland Gap, which brought a stream of long hunters down the Clinch and Powell valleys into what is now Claiborne County. The land at the time was part of Cherokee and Shawnee hunting grounds, and hostile attacks by members of these two tribes were not uncommon.

To protect themselves, hunters, fur traders and early settlers erected a series of small forts and stations along the Powell and Clinch valleys. One such station, known as Fort Butler, was located just west of modern Tazewell. Among the earliest settlers in the Tazewell area was John Hunt (1750–1822), a militia captain who would later be instrumental in the founding of Huntsville, Alabama.

In 1804, three years after the creation of Claiborne County, Tazewell was chosen as the county seat due in part to Hunt's influence (although a local legend states that the residents of Tazewell's rival for the seat, Springdale, were too intoxicated to vote on the day of selection). Hunt was named the county's first sheriff, and the government met at his house until a courthouse was constructed.

The original courthouse was a wooden structure which had hitching posts for horses in front. In 1862, at the height of the Civil War, Confederate troops occupied Tazewell as part of the greater struggle for the strategic Cumberland Gap. When the Confederates evacuated the town in November of that year, a fire followed, destroying much of Tazewell.

The town retains a number of historical structures, mostly from the Victorian era, including a historic jail, built in 1819. In 1890, plans developed for a railroad through the town, connecting nearby Cumberland Gap to Knoxville Residents protested the construction of a train depot, which led to the re-routing of the railroad and establishment of a depot several miles west, still bearing the name of the town.

The area around the depot saw the birth of a new town, with businesses and homes propping in its vicinity. This town would later incorporate into what is now the city of New Tazewell.In the early years of its incorporation, a rivalry began between the two communities, often over development projects choosing to start up in the area.

In the 2000s, the rivalry subsided, and efforts to merge the two communities into one municipality were proposed, but were rejected.