A small settlement on the site of present-day Berryville was mentioned in court records as far back as 1775. The town formed at the crossroads of two early major trails used by pioneers, one going from Winchester to Alexandria and the other going to Baltimore from Waynesboro. Near the intersection of these roads was an inn, which became notorious for its Saturday night brawls. Because of these fights, the settlement was first known as "Battletown."

The town was granted a Charter by the Virginia General Assembly on January 15, 1798, and named for Benjamin Berry, the first operator of the noted inn and the Town's founder. A 20-acre site with 66 quarter-acre lots was platted as the original corporate limits. The 66 lots were laid out on Main Street and two parallel streets; one of these was North Second Street (now Academy Street), the other was the present Crow Street. A few lots were also platted on what is now Church Street. The town extended westward to near the present bend in Main Street. Included in the original plat were two cross streets, Church and Buckmarsh (formerly Main Cross and Upper Cross Streets).

Berryville has been the County Seat since the formation of Clarke County in 1836. In addition to being a commercial and political center, industrial development aided the later growth of Berryville.

Early industries included carriage works, lumber mills, and flour mills. After 1880, with the completion of what is now called the Norfolk and Western Railroad, the Town became an important station in terms of both the amounts of freight handled and the number of passengers served. By the early 20th century, fruit processing and related industries had grown in importance.

Both the Revolutionary War era and the Civil War were periods of particular importance to Berryville. Prior to and during the Revolutionary War, George Washington was a frequent visitor to the Town. Washington had a surveying office (no longer standing) at Washington Springs, northeast of Berryville. General Daniel Morgan, a Revolutionary War hero, also lived just north of the corporate limits at Soldier's Rest. In his younger days, Morgan visited Berry's Tavern regularly and became "champion" of Battletown. It was from this region that he recruited the famed Morgan's Virginia Rifles. During the Revolutionary War he became a General and was instrumental in victories at Saratoga and Cowpens.

Berryville and Clarke County witnessed much bloodshed during the Civil War. There were ten battles and skirmishes in Clarke County in the Shenandoah Valley campaigns of Generals Jackson (C.S.A.) and Sheridan (U.S.A.). Three of these battles are of particular note.

The major battle in the County was the Battle of Cool Springs, July 18, 1864. This took place in the northeastern part of the County, on ground now owned by the Holy Cross Monastery. Upon returning to the area after a raid on Washington, D.C., General Jubal Early and his Second Confederate Army Corps were camped at Cool Springs. The pursuing Union forces under General George Crook fought the Confederates on the west bank of the Shenandoah River. After a two and a half-hour battle, the Union forces were pushed back across the river, and Early moved on to Strasburg. The battle left many casualties - 422 Union and over 350 Confederate.

Two other engagements took place within a 1.5-mile area surrounding Berryville. The "Buckmarsh Fight" occurred on August 13, 1864, about one mile north of Berryville where Route 340 crosses Buckmarsh Run. It involved Major John Mosby, "the Gray Ghost of the Confederacy," a leader noted for his surprise attacks. A large Union wagon train was headed from Harpers Ferry to Winchester via Route 340. Early in the morning, while the train stopped at Buckmarsh Run, Mosby attacked. Numerous wagons were seized. After the battle Mosby was promoted to Lieutenant Colonel by General Lee.

The Battle of Berryville occurred in September 1864. Confederate General Anderson was ordered by General Lee to move from the Shenandoah Valley to Petersburg. The headquarters of Union General Sheridan's forces were at Rosemont, near Berryville. When Anderson passed through the area, the forces engaged in battle. Union troops were pushed back to positions along the Summit Point Turnpike (State Route 611), and Anderson moved on towards Petersburg.

Downtown Berryville is one of 5 historic districts in the County listed on the State and National Register of Historic Places.

In 1985, an historic property survey was conducted by the National Preservation Institute at the request of Clarke County and under the direction of the Virginia Department of Historic Resources. The survey listed 314 buildings in Town that contribute to its historic character. In June 1987, the Berryville Historic District was placed on the Virginia Landmarks Register. In July of that year, the district was entered in the National Register of Historic Places. The district consists of properties located on Academy, Blackburn, Buckmarsh, Liberty, Main, Rice, Smith, and Treadwell Streets and on Swan Avenue between Church and Buckmarsh.

Berryville was accepted into the Virginia Main Street program in 1992 and still remains the smallest community in the program. This program is designed to preserve, revitalize, and promote the unique downtown center.

A smaller, local historic district, focusing on the downtown commercial area and main entry corridors, was adopted by Town Council in April 1993. The local district aims to ensure that new structures will be compatible with the existing character of the Town, and to provide for review of demolition requests for older structures.