Florence was built as a transportation center, with three railroads including a small railroad depot for the trains that hauled coal from the neighboring towns of Rockvale and Coal Creek. After a small oil was discovered north of Canon City at Oil Spring, commercial quantity oil was discovered in Florence in 1862, Florence became the first significant oil center west of the Mississippi. In the early 1880s the town grew rapidly. The city was named after Florence, the daughter of local settler James McCandless. The town was incorporated in 1887.
The Downtown Florence Historic District was listed on the National Register of Historic Places in 2017.