The town's name is conjectured to derive from 'Twy-ford-ton' or 'Twyverton', meaning 'the town on two fords'. The town stands at the confluence of the rivers Exe and Lowman.

Tiverton owes its early growth and prosperity to the wool trade, which caused the town to grow rapidly in the 16th and 17th Centuries.

Tiverton's revival in recent years began with the construction of the A361 - or North Devon Link Road - in the late 1980s. In the 1990s a new industrial estate was built at Little Gornhay on the north eastern edge of the town, and a new junction was added to the link road, with a distributor road (now the A396) into the town which has fast become its main gateway. Western Way, linking this road to the Exeter Road along the line of the old railway, was also constructed. These two roads opened up a new aspect to the town, and paved the way for expansion.

The demand for housing in the UK and particularly in the South-West has driven house prices up and many now look to towns on the periphery of employment centres. Tiverton has become a popular dormitory town for commuters to nearby Exeter and Taunton.