Tumwater was established next to the Deschutes River Falls at the south end of Puget Sound as New Market in 1846. It was the first American settlement on Puget Sound. The name was changed to Tumwater borrowing from a Chinook Jargon phrase tumtum chuck meaning "waterfall" or "rapids" (literally "heartbeat water"). Despite its early settlement date, Tumwater wasn't officially incorporated until November 12, 1875.
From 1896-2003, Tumwater was well known regionally as the home of the Olympia Brewing Company. The Olympia Brewing Company began producing beer in 1896 at a site along the Deschutes River and continued until Prohibition. After Prohibition ended, a new brewery was erected just upstream from the original site. The brewery was sold a couple of times and eventually closed on July 1, 2003.
