Fairbury was founded in 1869 by James B. Mattingly and Woodford G. McDowell, who each donated 80 acres for the townsite; McDowell named it after his hometown of Fairbury, Illinois. The town grew fast, reaching 370 residents by 1870 and becoming county seat in 1871 before incorporating in 1872. Its defining era came with the railroad: the St. Joseph and Denver City line arrived in 1872, and the Chicago, Rock Island and Pacific Railroad made Fairbury the headquarters of its Western Division in 1886, a status that lasted until 1965 (rail service ended entirely in 1980). Just southeast of town, Rock Creek Station on the Oregon-California Trail was the site of Wild Bill Hickok's first known gunfight in 1861, now preserved as a state historical park.

Fairbury's population peaked at 6,395 in 1950 and stood at 3,970 at the 2020 Census. Its ZIP code is 68352. The economy today centers on Jefferson Community Health Center and the public schools, alongside brick, tile, and stainless-steel manufacturing. The town's Commercial Historic District, Rock Island Depot Museum, City Museum, and Jefferson County Courthouse are notable landmarks, and Fairbury natives include Marine Corps general Lowell English, actress Irene Worth, and federal judge/congressman Robert Vernon Denney.