Farwell was named after Samuel Farwell, a resident of Utica, New York and a well-known contractor for the building of public works. His works include the Croton Aqueduct, which supplied New York City with clean water around 1840. He was also involved in the building of the Erie Canal. He was a major stockholder in the Flint Pere Marquette Railway Company. His son-in-law, William Potter, was also employed by the railroad.

Farwell was a planned community on the Flint\Pere Marquette Railroad by the Farwell City Company. The Trust Deed was dated December 5, 1870 and signed by Ezra Rust, Gurdon Corning, L.B. Curtis, James Hay, Ammi Wright, Thomas Merrill, Edmund Hall and their wives. They were all in the logging business and needed a town closer to their camps where they could pick up supplies.

Farwell was the first county seat of Clare County. Business was booming until 1877 when the County House Burned. Arson was suspected, but never proved. Clare and Farwell vied for the county seat after the fire, but it was moved to Harrison in 1879. Harrison was thought to be more centrally located.