The first mills in Ontario were built by the British government to provide necessary services for Loyalist settlers arriving in 1784. Built where there was an adequate source of waterpower, mill sites soon became the centre of early communities. Proximity to a mill was important to the economic success of farmers and many businesses in Upper Canada. Mills were often a family business. Until the introduction of steam power, mills were of necessity seasonal operations. The length of season depended on a number of factors such as the climate, water source, and customer demand.

A saw mill was one of the first mills constructed, as it provided essential building materials. Often farmers brought in their own materials to be sawn. Beach's Sawmill at Upper Canada Village saws logs into lumber on a daily basis and interprets the role of a local sawmill and the various uses of its lumber within the community.

A flour mill soon followed, as the milling of wheat into flour was an important aspect of food production which the farmer could not do effectively himself. Powered by water, these mills used millstones to produce different grades of flour and feed. He charged the farmer 1/12th of the weight of his product to grind his grain, a suitable arrangement in a cash-starved economy. As technological improvements became possible and economically justifiable, millers improved their mills to become more automated, increase production, and make use of steam power as a substitute or complement to available waterpower. Bellamy's Steam Flour Mills represents a flour mill which was of necessity recently renovated to include an automated elevator system, additional millstones, and a new steam engine.

Before 1800, the time consuming process of making clothes, from raising sheep to sewing cloth into a garment, was done at home. By the early 1800s, carding and fulling mills emerged to take over the laborious tasks of preparing the wool fibres for spinning by scouring and combing this wool (i.e. carding), and preparing finished cloth for sewing by cleaning, shrinking and thickening the woven cloth produced off a loom (i.e. fulling). By the 1860s, as farms became more productive and the demand for more services arose, woollen factories emerged that could efficiently complete all aspects of the process, spinning, plying, dying and weaving wool as well. Women and children were hired to do many of the unskilled tasks, and mills gained a reputation of exploiting their workers. The Asselstine Woollen Factory represents this type of factory, demonstrating all of the processes involved in turning raw wool into cloth.

In the second half of the 19th century, communities continued to grow, farms continued to improve their production capacity, transportation links such as the railway became more reliable and less expensive, and political conflicts arose abroad. All of these factors expanded the markets for mill products such as lumber, flour and cloth. Mills no longer supplied only the needs of the local community, but became active in retail and export trade. Larger mills were built and millers began buying logs, grain and wool in order to produce much greater quantities for export to the United States and Britain.