Fairlee was chartered by New Hampshire Governor Benning Wentworth on September 9, 1761 and first settled in 1766. The western half was set off as West Fairlee in 1797. By 1859 it had several sawmills, a gristmill, and an establishment for lead pipe and pumps. The Fairlee Railroad Depot was built in 1848 by the Connecticut & Passumpsic Rivers Railroad and is listed on the National Register of Historic Places as the oldest surviving railroad structure along the Connecticut River.

There is a bridge in Fairlee that spans the Connecticut River to Orford connecting Vermont to New Hampshire. On the Vermont side, Fairlee is accessed from Interstate 91 North or South at exit 15.