Godalming is recorded in the will of King Alfred the Great in about 880 A.D. as 'Godelmingum' meaning 'the people of Godhelm', who probably settled in this beautiful valley by the River Wey in the 7th or 8th century. William the Conqueror held Godalming at the time of the Domesday Survey in 1086, although the church and its associated lands were held by Ranulf Flambard, later Bishop of Durham. Parts of the parish church of St Peter and St Paul date from before Flambard's time to the early 11th century but the church as seen today is dominated by its 14th century leaded spire.

It was as an industrial town that Godalming found prosperity. Here there was a good supply of water to drive the mills and the town became a manufacturing centre for cloth, hosiery, paper and leather, and also as a source of Bargate Stone, which was dug from the local hills.

The monks at nearby Waverley Abbey are credited with the introduction of the woollen cloth industry to the area and by the 16th century Godalming had become a major cloth-making town. Here cloths known as 'Kersies' were manufactured and exported throughout Europe. The wool trade had seriously declined by the mid-17th century and Godalming then turned to the production of knitted garments, particularly stockings, made on the knitting frame, which had been invented in 1589. For centuries Godalming was the premier centre of the knitting industry in southern England but the last firm closed down about ten years ago. Paper was manufactured at several mills around the town but the last of these stopped production in the late 1920s. The tanning of leather and also skin curing continued until after the Second World War.

After the restoration of Charles II in 1660 Portsmouth developed as England's premier naval station and traffic on the road between the port and London increased dramatically. Godalming is exactly halfway along that road and in the coaching days it made an ideal overnight stop en route. Inns such as the King's Arms, the Great George, the Angel and the Red Lion were justly popular. The Red Lion and the King's Arms still serve the town and the latter has entertained many famous guests down the centuries including Czar Peter the Great of Russia.

In 1764 the Godalming Navigation opened, linking the town by water to the Wey Navigation at Guildford and thence on down to the Thames near Weybridge and onward to London. The Town Wharf flourished for the shipment of bulk good such as timber, corn and Bargate Stone. The Wey and Godalming Navigations are now cared for by the National Trust and Godalming has the distinction of being the furthest south a boat can travel on the connected navigable inland waterways of England.

In 1881 Godalming Borough Council made the pioneering decision to replace its gas street lamps with electric lighting. It was also intended that the electricity supply would be extended to the homes and businesses of the town. A generator powered by a turbine at Westbrook Mill produced the electricity. Godalming had established the world's first public electricity supply service.

The railway arrived in Godalming in 1849 and soon attracted new residents and institutions including Charterhouse School, which moved here from London in 1872. In 1859 the railway was extended to Havant thus creating a direct link from London to Portsmouth. Surrounded by beautiful wooded hills and water meadows, Godalming continues to be one of the most popular residential centres in Surrey.