The history of Monticello begins in 1822 with the arrival of Quaker George Haworth  who was a liaison agent for the United States government and the local Native American tribes.  Haworth constructed a small log cabin, the first in what was later to become Piatt County, but soon left the area.  In 1829 James A. Piatt purchased Haworth's cabin for his family and this area became known as Piatt's Point.

While movement was being made toward the formation of Piatt County, James A. Piatt, Major James McReynolds, Abraham Marquiss, and William Barnes formed a joint stock company to develop a village.  James A. Piatt registered the plat in Macon County in 1837 and Major James McReynolds named it Monticello, a reflection of his admiration for Thomas Jefferson.

The citizens of Monticello and the surrounding areas began to complain about the distance required to travel to the county seat of Decatur to attend to legal matters.  In 1841 a new county was organized and named in honor of James A. Piatt.  Monticello, being the only established town at the time, was named as the county seat.

Access to Monticello greatly improved with the coming of the railroads to Central Illinois in the 1860s.  Monticello finally secured a contract for a railroad between Champaign and Monticello in 1871 and Monticello incorporated as a city in 1872.

By the 1880s, the widespread use of drainage systems allowed agricultural operations around Monticello to expand and bring the success of farming to the area.

One of the most important men in the history of Monticello arrived in 1885.  Dr. W.B. Caldwell came to practice medicine in Monticello, but his homemade mixture of senna and pepsin brought Monticello to a level of national prominence.  The Pepsin Syrup Company was founded in 1893 and became the leading employer in the city for decades.

During the 1966 City Beautification Project, many of the pent roofs and new storefronts were added to the buildings facing the square.  The project was conceived as an approach to bettering Monticello's image.

By the early 1990s, public attention had shifted toward historic preservation.  The City of Monticello applied and was accepted to become a Main Street Community.  This program was developed by the National Trust for Historic Preservation and advocates regeneration of the historic downtown areas throughout the United States.  Monticello is only one of many Main Street Communities in Illinois.  In order to qualify, the city had to form a Historic Preservation Commission and also create a historic preservation ordinance as part of the city's legislation.

The focal point of Monticello is the courthouse square and surrounding historic commercial district.  To the nearby north of the downtown is the National Register-listed North State Street Historic District, a six block long residential district consisting of fifty-six contributing buildings and to the nearby south of the downtown is the National Register-listed South Charter Street Historic District, a three block long residential district consisting of fifty-nine contributing buildings.

The city currently has two local designed landmarks.  The Monticello Depot designated in 2004 and the Piatt County Courthouse designated in 2005

Historic Preservation Commissioners are appointed and approved by the mayor and city council.  Commissioners serve 3 year terms.