The origins of Sherman County are said to have begun with a group of men who lived in Grand Island in the early 1870s. These men organized a settlement plan for the Middle Loup River Valley and secured the necessary authority from Gov. Robert Furnas and the Legislature to proceed in early 1873. When the county was formally organized it was named after Civil War hero Gen. William Tecumseh Sherman, who once commanded cavalry troops in Nebraska.

In the county's first official election, held on April 1, 1873, a mere 13 votes were cast. Elected to office were three commissioners, a clerk, judge, treasurer, sheriff, surveyor, coroner and superintendent of public instruction. By the following year the county had its first courthouse, built at a cost of $5,000. But on the same day commissioners accepted a bid to furnish the building, it was destroyed by fire. It would be four years before the structure to be replaced.

The Loup River, which cuts across the county diagonally, was responsible for attracting many of the area's first settlers. The fertile valley soil and the plentiful supply of water made the area a prime location for early farmers. Irrigation further enhanced the county's farm economy when it made its first appearance in 1895. This early irrigation system consisted of a ditch being dug between Arcadia and Loup City and water being diverted from the Loup River.

Irrigation would once again become an important part of the county's history in 1932 when the Middle Loup Power and Irrigation Company was created and in 1959 when work began on the Sherman Dam and Reservoir.

The courthouse that was built in Loup City in 1878 would be outgrown by the county as the 1900s began. Efforts would begin to replace the existing building with a courthouse that could accommodate all county offices and the expanding volume of records. Construction began in 1920 on what is the present courthouse. The tan brick building with terra cotta trim was formally dedicated on Oct. 8, 1921.