Kleinburg, like many riverside villages matured around the existence of numerous mills. In 1848, John Nicholas Kline bought 83 acres west of Islington Avenue, where he built a sawmill and a gristmill. The Kline mills not only served the local farming community, but became the impulse for a growing commercial centre.

Kleinburg has had drifts to the spelling of its name: Klineburg and Kleinburg. It is accepted that the village was named after John N. Kline, however, its present spelling was borrowed from a combination of two German words: Klein, translating as "little or small" and "berg" meaning "mountain". The name "small mountain" perfectly characterizes the topography and the environmental setting of Kleinburg.

By 1860, the community that grew from the establishment of the mills included various professions. By 1870, a chemist (druggist), a cabinet maker, an insurance agent, a butcher, a milliner and a tinsmith, were added to the index of local businessmen.

Kleinburg also became famous as a resting stop for farmers or merchants on their way to, or from Toronto. The original Humber (Indian) Trail used by the early traders remained the most dynamic route to Toronto. The Humber Trail in Vaughan runs along what is today Islington Avenue and extends down to Dundas Street in the City of Toronto.

The tradition of the Binder Twine Festival originated with Charles Shaw Jr. who, in the 1890's, began the trading of binder twine to the local farmers. Legend states that the Shaws gave their binder twine customers a dinner in gratitude of their business. The humble dinner eventually became a large community festival complete with games, refreshments and entertainment. The Binder Twine Festival was held once a year until 1930 and was subsequently returned in 1967.