Derby was settled in 1642 as an Indian trading post under the name Paugasset. It was named after Derby, England in 1675.

In the Nineteenth century, both corsets and hoop skirts were manufactured in the city.

Charlton Comics, a comic book publishing company that existed from 1944 to 1986, was based in town.

Home of the Derby Red Raiders, state champions in football many times. Derby High has always been a school heavy on sports, but due to its small size has not been very successful in recent years. Derby cheerleading for both the high school and Pop Warner, have been very successful over the years, as well as the school's wrestling.

The Green received a complete makeover in the spring of 1999.

Antoine Fuqua's upcoming kidnap and revenge drama Prisoners cast the town of Derby in Connecticut as itself in the film. Fuqua and crew will be using the local police insignia, the town seal and 750 of the locals as extras. Hugh Jackman is rumored as the main character as well as Christian Bale and Russell Crowe considering the co-starring role.

The city has resurrected an "historic trough" – a century-old granite structure with lion-head spigots—as part of a gateway entrance plaza at the Divsion Street entrance to the Derby Greenway. The fountain was given to the City in 1906 by the National Humane Alliance and erected at the intersection of Seymour and Atwater Avenues. The water was first turned on on June 1, 1906. Years later it was moved to Founders Commons when traffic patterns made its original location a problem. It fell into disrepair and was not used as a fountain while on Founders Commons. When the Derby Greenway was built, the fountain was moved to its new location on June 22, 2006, fully restored with new plumbing and new lions heads and formally dedicated with the surrounding Derby Hall of Fame Plaza on September 1, 2007.

Also Saint Michaels Church and the Derby Hook and Ladder Firehouse.

According to the United States Census Bureau, the town has a total area of 5.4 square miles (8.7 km2), of which, 5.0 square miles (13 km2) of it is land and 0.4 square miles (1.0 km2) of it (7.41%) is water. The city is home to the 1.4 square kilometres (350 acres) Osbornedale State Park.

As of the census of 2000, there were 12,391 people, 5,252 households, and 3,245 families residing in the town. The population density was 2,487.6 people per square mile (960.7/km2). There were 5,568 housing units at an average density of 1,117.8 per square mile (431.7/km2). The racial makeup of the town was 90.08% White, 3.62% Black or African American, 0.16% Native American, 1.74% Asian, 0.06% Pacific Islander, 2.52% from other races, and 1.82% from two or more races. Hispanic or Latino of any race were 7.67% of the population.