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The first settlers arrived in 1846 and cultivated cotton in the black and fertile prairie soil. Between 1850 and 1902 there were two settlements. Rock Hill was two miles south of the present town and Richland was one mile north. The development of these small communities was facilitated in 1876 when the county court ordered the establishment of small lands for prompt sale. Each of these tracts was about 160 acres in size and sold for $3.50 per acre. Dr. A.T. Bryant of McKinney later purchased what is now the center of town.
The town merged during the establishment of the St. Louis & San Francisco Muni in March 1902. For many years, Prosper was the central rail stop between Dallas and Sherman. When local officials applied to a post office named “Richland”, they were informed that the city name was already in use. Postmaster B.J.Naugle asked for another name, and J.C. Slaughter suggested the name “Prosper” because the crops of the year were so prosperous.