On December 29, 1856, Dr. Richard Rodgers Peebles and James W. McDade organized the Hempstead Town Company to sell lots in the newly-established community of Hempstead, located at the projected terminus of Houston and Texas Central Railway. Peebles named Hempstead after Dr. G. S. B. Hempstead, Peebles’ brother-in-law. Peebles and Mary Ann Groce Peebles, his wife, contributed 2,000 acres (8.1 km2) of the estate of Jared E. Groce, Jr. for the community. On June 29, 1858, the Houston and Texas Central Railway was extended to Hempstead, causing the community to become a distribution center between the Gulf Coast and the interior of Texas. On November 10 of that year, Hempstead incorporated. The Washington County Railroad, which ran from Hempstead to Brenham, enhanced the City upon its completion.
Hempstead is famous for its watermelon crop, and until the 1940s, the town was the top shipper of watermelons in the United States. Billy DiIorio was known as the Watermelon King, and Angelina DiIorio was known as the Watermelon Queen. Both resided in Hempstead, Texas. The town holds an annual Watermelon Festival in July.
The town has grown recently because of its relative closeness to Houston along U.S. Highway 290. The current economy is based on county government, shipping, and an enormous auto dealership which closed its doors in 2009.