Town and Gown was founded on October 31, 1927 by both SMU representatives and prominent Dallas residents. The original goals of the organization were to promote fellowship, intellectual stimulation, and dialogue between Southern Methodist University and the greater Dallas community.

At its inception, membership was distributed evenly between both "town" and "gown," each were allowed 15 persons. Topics discussed at these early meetings varied from communism to birth control to the Davis Mountains. Membership was limited to men only, although at the end of each year wives were allowed to attend the final meeting. The exclusion of women from membership changed in 1974 at the behest of resigning member, SMU Political Science professor Franklin Balch. It was not until 1976 that women were allowed to attend Town and Gown meetings regularly, not only as spouses but as invited guests. There is some confusion as to who was the first woman member of Town and Gown. However, records show on February 24, 1977, that Judge Annette Stewart appears as the first woman member appointed to Town and Gown. Although correspondence show's Stewart's nomination and acceptance in the Spring of 1977, her name does not appear on the membership directory until the 1977-1978 year.

Early membership rolls boasted prominent Dallas figures such as Robert E. Lee Saner, John Avery Lomax, John O. Beaty, as well as Southern Methodist University presidents. Currently, Town and Gown still boasts a membership of prominent Dallas civic and corporate leaders, as well as university representatives. Membership has increased to 60 members, still divided evenly among the "town" and "gown." The organization has celebrated both its 70th and 80th anniversaries and has met regularly since its creation in 1927. This makes Town and Gown one of the oldest organizations associated with SMU.