The Town of Troy, like the rest of Montgomery County, was settled primarily by Scottish immigrants. In 1852, Angus McCaskill, one of the early settlers, donated a tract of 50 acres to the community to serve as the town proper. Until a legislative decree changed the name, the community was known as West's Oldfield. That same decree also located the courthouse in the new community and made Troy the business center of a thriving county.

According to the Montgomery County Historical Society in the publication The Heritage of Montgomery County North Carolina 1981 there are two prevailing accounts of the origin for the namesake Troy. The majority of historians attribute the name to be in honor of Alexander Troy, a popular State Solicitor who attended Montgomery Superior Court. Other historians attribute the name to be in honor of John B. Troy, a popular attorney in the area.

Legend has it that the streets of Troy were paved with solid gold. When the streets were being paved, fill dirt was brought in from the gold mines in Eldorado, a once thriving mining community north of the town. Local citizens with a sharp eye found gold nuggets in the streets of the city. Even today, Troy still represents a golden opportunity for its citizens and visitors.