In 1866, Atherton, known as Fair Oaks, was a flag stop on the Southern Pacific Rail between San Jose and San Francisco, where owners of large estates spent their summers. The entire area was known as Menlo Park. It had been part of the 35,240 acre Rancho de las Pulgas of the Arguello family which is today San Mateo County. In 1923, when Menlo Park decided to incorporate to include Fair Oaks, the large estate owners wanted to maintain their community as strictly residential, and realized they would have to incorporate separately. Both groups rushed to Sacramento, the Fair Oaks representatives arriving first. Since Fair Oaks was a name already in use at a nearby Sacramento town, they chose Atherton in honor of Faxon Dean Atherton, one of the first property owners to reside in the area. Among the large estates in Atherton were that of Selby's "Almendral", Doyle's "Ringwood", Flood's "Linden Towers", Atherton's "Valparaiso Park", Donohoe's "Holmgrove", Watkins' "Fair Oaks" and Holbrook's "Elmwood".
Built as a summer residence on 1875, the property, Elmwood, was leased by the Russian Consulate. In 1881, Charles Holbrook, a New Hampshire native, who resided in San Francisco, purchased the property and named it Elmwood. It was a farm supplying the family food throughout the year. One half acre was planted in Elm trees, hence the name.
Faxon D. Atherton, a native of Massachusetts, had spent several years in Chile and Hawaii as a trader in tallow, hides and merchandise. His friend and business associate, Thomas Lark, had written to him "there is education available for your children and a dignity of living on landed estates down the San Francisco peninsula (that is) convenient and accessible." Atherton purchased 640 acres for ten dollars an acre ($2470/km²) in 1860. His home, "Valparaiso Park", was built several years later. It was simple in design and ample for his family of seven children.
Because of the development of the railroad, other San Franciscans traveled south and established summer homes. Because the dirt roads were usually impassable in the winter, the families were only in residence from May through September.
Thomas H. Selby purchased 420 acres. A successful businessman, he served as mayor of San Francisco. His county estate was called "Almendral". John T. Doyle, an attorney, built a home off Middlefield Road, "Ringwood". James C. Flood purchased successive parcels and built an extravagant mansion, "Linden Towers". This is now Lindenwood. The Joseph A. Donohoe estate was "Holmgrove" and is now the site of Menlo Atherton High School. James Thomas Watkins' home was "Fair Oaks" and after two moves, stands restored today on Alejandra Avenue.
The government was established with Edward E. Eyre as the first mayor. In 1928, the residents voted to build a Town Hall, which stands today. The early residents wanted a Town that would be divided into large parcels and would not contain businesses. The author Gertrude Atherton, daughter-in-law to Faxon D. Atherton, wrote in her book, The Californians, "Menlo Park (Atherton) has been cut up into country places for what might be termed the 'old families of San Francisco', the eight or ten families who owned the haughty precinct were as exclusive, as conservative, as any group of ancient country families in Europe." A few of the large land holdings were subdivided during the 1920s and 1930s, and the James Flood estate in 1938. In the 1940s and 1950s, over eighty subdivisions were recorded. With the minimum size of one acre (4,000 m²), the era of the large estates was over. Atherton is still a "plain of oaks". Native live oaks, white oaks, bays, redwoods, cedars, pines and other ornamental trees cover the six square miles of town. There are approximately 50 miles (80 km) of roads. The population is around 7,500 with approximately 2,500 households.
Olive Holbrook-Palmer left Elmwood, a 22 acre estate, to the Town in 1958. The Town of Atherton name it Holbrook-Palmer Park in 1964. It is an open, tree-covered park, which offers recreational programs and has facilities for functions.