The town was first settled around 1725 by John Moore, a patentee for this territory. During the American Revolution, colonial forces constructed Fort Montgomery and Fort Clinton to obstruct enemy progress on the river.

The Town of Highlands was created from the Town of Cornwall in 1872, making it one of the last towns formed in the county.

Communities and locations in Highlands:

• Bear Mountain State Park – Part of the state park is on the south border of the town.
• Crows Nest – An elevated location near the north town line.
• Fort Montgomery – A hamlet on the bank of the Hudson River.
• Gees Point – A projection into the Hudson River by West Point village.
• Highland Falls – The Village of Highland Falls in the eastern part of the town on the Hudson River.
• Palisades Interstate Park – Part of the park is by the south town line.
• West Point – A hamlet on the Hudson River north of West Point, the military academy