Shelby is named for Isaac Shelby, the Revolutionary War-era hero of the battle of nearby Kings Mountain. Officially incorporated in 1843, Shelby was designated the county seat of the newly-formed Cleveland County. The town grew slowly and most economic activity was based upon either the county government functions, or service to farmers around the region.

The Civil War interrupted life in Shelby with many of the local men serving in the Confederate forces. Federal troops occupied the Courthouse Square after Lee's surrender at Appomattox, Virginia in 1865, and marked the beginning of Reconstruction.

Toward the end of the Reconstruction period, Shelby began to make industrial progress with the investment of Northern-based industrialists. The pace quickened after rail service was introduced by the Carolina Central Railroad in 1874. Later that same year Reconstruction was effectively ended with the election of Governor Zebulon Vance. The 1880's were still primarily dominated by agriculture, with corn, wheat, oats, cotton and tobacco being major crops.

Also during the 1880's a locally-based political movement known later as the "Shelby Dynasty" began to gain influence locally and state-wide. This gathered momentum with civic pride and economic growth in the later part of the 19th Century, with the beginnings of a Masonic Lodge, YMCA, Knights of Pythias, and Woodmen of the World, along with a United Camp of Confederate Veterans. In 1894 the women of the South Washington Street neighborhood founded a literary club, believed the first such society for women in North Carolina.

A building boom in the 1920's increased the population of Shelby at the same time of cotton and textile industry expansion. In 1924 the Masons moved to the impressive Egyptian Revival lodge constructed on South Washington Street. Newer homes were built along Marion Street and Lafayette as well. During this time the Shelby Dynasty sent two governors to Raleigh, as well as representatives to the House and Senate in Washington. Governor O. Max Gardner guided the state through the Great Depression and was a strong presence in Washington and New York after the end of his term.

During the mid-century, farming gradually diminished as textiles and manufacturing grew in strength. The local economy began to see strains with the shifting of textile ownership into consolidated corporate structures later on and other manufacturing interests grew as a result.

Today, Shelby is still a courthouse town, but the economy is greatly diversified with industry and agriculture providing the engines of growth. The town center features historic buildings and tree-lined streets, with the commercial center begin designated a National Register Historic District and designation as a Main Street city since 1980. In about 2006, local citizens began to organize an effort that has resulted in the opening of the Don Gibson Theatre and the Earl Scruggs Center to honor two great natives who became leaders in the national music scene during the last half of the 20th century.