The settler tradition says Kokomo was named for Kokomoko or Ma-Ko-Ko-Mo (meaning “black walnut”), shortened to Kokomo, said to have been one of the four sons of Chief Richardville last of the chiefs of the Miami people. Folklore holds that he was 7 feet (2.1 m) tall and falsely gives him the title of “chief.” David Foster, known as the “Father of Kokomo,” claimed that he named the town Kokomo after the “ornriest Indian on earth” because Kokomo was “the ornriest town on earth.” Kokomo is thought to have been born in 1775 and died in 1838. The only documentary proof of his existence is a trading post record of a purchase of a barrel of flour for $12 for his “squaw.” His remains (with those of others) were reportedly discovered during the construction of a saw mill in 1848 and re-interred in the “north-east corner” of the Pioneer Cemetery. The tradition of the Peru Miami is that the town was named after a Thorntown Miami named Ko-kah-mah, whose name is rendered Co-come-wah in the Treaty at the Forks of the Wabash in 1834. That name was translated as “the diver” (an animal that could swim underwater).

As a result of various removals, by 1840 the Miami population in Howard County (until 1846 known as Richardville County) was reduced to about 200. The principal settlement was the Village of Kokomo, on the south side of Wildcat Creek. Indian paths connected Kokomo with Frankfort and Thorntown (along the Wildcat) and led to Peru by way of Cassville, and to Meshingomesia by way of Greentown. At the time David Foster had a trading post in Howard County, near the intersection of the reservation boundary line and Wildcat pike, where he engaged in both legitimate trade and illegal sale of alcohol to the Miamis on government property. Shortly after Richardville County was organized in 1844 the commissioners appointed to establish the county seat approached Foster for a donation from his substantial holdings. (In 1846 tax records show that he owned 552 acres (223 ha) of farmland and as well as 67 divided lots in the business district.) At the time of the request, the only improvements in what is now Kokomo were Foster’s log house and log barn and several Miami huts. The commissioners sought a donation of the more fertile lands south of Wildcat Creek, but Foster refused, donating instead 40 acres (16 ha) north of the creek—land which was thickly forested and “swampy.” The terms of the donation required that Foster build a courthouse on the land, but he was later excused and Rufus L. Blowers was promised $28 to build it. He was penalized $2 for construction delays. The log courthouse was completed in 1845.

The year 1854 saw the first railroad stop at Kokomo. The New London Pioneer had long advocated for a rail line to connect Kokomo with Indianapolis. Colonel C.D. Murray was the agent at Kokomo for stock subscriptions in support of the railroad. In 1852 the construction of the Peru and Indianapolis Railroad commenced. In Kokomo Samuel C. Mills and Dr. Corydon Richmond, commercial competitors of David Foster donated several lots to the railroad in order to secure the location of the rail depot near their commercial property. The route was laid along Buckeye Street at the insistence of the merchants who hoped to reduced drayage expenses. Samuel Mills built a large frame structure at the Howard flouring mills, which served as a warehouse for the company’s freight and a passenger depot. For some time after 1854 Kokomo was the terminus of the line, but eventually, the line was extended to Peru and then to Michigan City.