Ebenezer Thompson first settled in the area in 1848 and purchased the land that would become the village in 1855. Downsville was officially established in February of 1858.
Thompson built a small saw mill on the bank of the Red Cedar River. The mill was soon destroyed by a flood and in 1858 he deeded the land and mill to Burrage B. Downs who built a dam across the river.
Thompson had dug a small chute which functioned as a mill race, to float logs in and out of the mill. It gradually widened throughout the years and became the eventual path for a 1905 flood which carried away the railroad bridge and washed out the eastern side of the dam. The flood resulted in the re-route of the Red Cedar River and formed the oxbow ponds just south of the Simply Dunn schoolhouse. Knapp, Stout & Co. ran a company store in Downsville, as early as 1870 and Captain Downs sold the mill to the company in the 1880s.
Knapp & Stout expanded the lumber operation, continuing the company store and adding a boarding house. The Downsville general store building may be one of the only Knapp Stout stores still standing.
It operated as a general store through 1999 and is currently the site of the Downsville Coffee House. The boarding house is now the Timber Inn. By 1870, Knapp, Stout & Co. had economic control of the Red Cedar River valley. Crews of lumberjacks cut the valuable virgin timber and transported it down the river. Communities thrived around the company’s mill and dams including Downsville, Menomonie, Cedar Falls, and Prairie Farm.
In the spring of 1883 the “Second Big Wash Out” flood washed away the existing dam and a number of buildings including the company store and sleeping shanty. By the turn of the century forest resources in the area were depleted and in September of 1900 Knapp, Stout & Co. closed the sawmill in Downsville.
The Downsville Cooperative Creamery, soon to be the largest in the county, was incorporated in 1903. The original creamery building was 26 x 60 feet. There were two subsequent additions, the first was built ten years later and was 14 x 60 feet. A second addition in 1924 was brick construction and measured 26 x 50 feet, at the cost of $11,000.