Kerbyville was named after James Kerby (or Kirby), who filed his original homestead in 1855. The Kerby post office was established there in September 1856, with James Kerby serving as the first postmaster. Kerbyville was chosen as the county seat in a county election a year later, beating out Grants Pass; but in 1886, as Grants Pass grew and became more accessible by railroad, the county seat was moved there.  

Kerbyville's name was changed to Napoleon in 1856 by the territorial legislature, perhaps because some thought that every Josephine (County) needed her Napoleon. This may have been the influence of a Dr. D.S. Holton, a principal landowner in the area and an enthusiast of Napoleon III and Empress Josephine. But the name was not popular and was changed back to Kerbyville. Eventually, the name was shortened to Kerby, as it is known today.

One early legend told about Kerbyville is that in the 1850s a muleskinner was hired to deliver a pool table to a Jacksonville saloon. He traveled from Crescent City through the Illinois Valley, over the Cold Spring Mountain Trail. The man chose his strongest mule to carry the heaviest and largest part of the table, but the mule only made it as far as Kerbyville before he died of exhaustion. On the spot, the driver decided to build a saloon at the site of the donkey's demise.

Kerbyville has one of the oldest post offices in the state and is the location of the historic Kerbyville Museum, which celebrated its fiftieth anniversary in 2009.