Hespeler was originally part of the land granted to the Six Nations Indians by the British Crown in 1784. The Indians, led by Joseph Brant, decided to sell a part of their grant and had the land surveyed. In 1798 a block of land known as Block 2 and measuring over 90,000 acres was sold to Richard Beasley and his partners who looked to parcel off and resell the land. This land came to the attention of a group of Mennonites in Pennsylvania who were looking for a place to settle.

The first of the Pennsylvanian Mennonites to own land in the Hespeler area was Abraham Clemens who arrived in 1809 having purchased 515 acres from Mr. Beasley. The following year Cornelius Pannabecker, said to be Hespeler's first blacksmith, arrived and sometime thereafter built a forge on his farm in the Beaverdale area.

In 1830 Joseph Oberholtzer purchased a large tract of land from Abram Clemens. This tract included much of the future site of the settlement of Hespeler. At about the same time Mr. Oberholtzer deeded some of this land to his sister Susanna who had recently arrived with her husband Michael Bergey. The Bergey's settled on the land and are considered to be Hespeler's first residents. The settlement's first name, Bergeytown, commemorates their arrival. This name did not last long, however, and by the mid-1830's the settlement was known as New Hope.

It was to the settlement of New Hope that Jacob Hespeler, for whom the town was later renamed, brought many of his hopes and ambitions in 1845. That year Mr. Hespeler purchased a total of 145 acres fronting on the Speed River. He then proceeded to build an industrial complex that would provide the footings for the settlement's later industrial strength.

The incorporation of the settlement of New Hope as the village of Hespeler in 1859 was due, in no small part, to the efforts of Mr. Hespeler and was, in part, made possible by the arrival of the Great Western Railway to New Hope on its route from Galt to Guelph. The presence of railway construction crews in the vicinity of New Hope encouraged Mr. Hespeler to call for a census of the settlement in 1857 hoping to find enough "residents" to qualify for incorporation under the terms of the Ontario Municipal Act of 1849. Incorporation was essential to Mr. Hespeler's plans for the settlement which could then separate from the county and elect its own Council. This Council would then have jurisdiction over all aspects of roads and bridges and a variety of other issues the most important of which were the location of industries and the ability to make provisions for fire protection and public health. The census was duly taken and on July 31, 1858 following which the government of her majesty Queen Victoria proclaimed that the settlement of New Hope would become the incorporated Village of Hespeler effective January 1, 1859. Over the following years the community continued its slow but steady growth and in January 1901, Hespeler attained its new status when it was incorporated as a town.

The town's industrial strength continued throughout the 20th century even though the population remained small reaching the 6,000 level only in the late 1960's. Despite its small size, the town was the home to one of the largest textile producers in the Canada. The general decline of the Canadian textile trade in the years following World War II had a major effect on the town as its largest employer could no longer compete on the world stage. The town was successful in attracting new businesses but remained in the shadow of its larger neighbours. When, in the late 1960's, the provincial government proposed the amalgamation of Hespeler with its larger neighbours Galt and Preston to form a single city, the idea was not well accepted. In the end, however, amalgamation could not be resisted. On January 1, 1973 the Town of Hespeler disappeared as a separate political entity when, along with Galt and Preston it became part of the new City of Cambridge. This union is symbolized in the City of Cambridge Crest.