Alstead began in 1735 as one in a line of nine forts intended to protect southwestern New Hampshire from Indian attacks. The town was named for Johann Henrich Alsted, who compiled an early encyclopedia that was popular at Harvard College. Alstead is the location of New Hampshire's first paper mill, established in 1793.

Alstead was one of the towns that wavered in its allegiance after the Revolutionary War. It decided to join Vermont in April 1781, but returned to N.H. authority early the next year.