In the Gazetteer and Business Directory of Madison County, N. Y. Hamilton Child described the town of Lebanon thus:
It is the center town upon the south border of the County. Its surface is a hilly upland, lying between the Chenango and Otselic Rivers. The summits in the west part are 500 to 800 feet above the valley. The valley of the Chenango River, extending through the east part is about one mile, and is bordered by steep hillsides.
That picture must have been in the mind of General Erastus Cleveland when he brought before the state legislature the act to split off a portion of the town of Hamilton to create a new township on 6 February 1807. When asked for the new town's name, he cried out, alluding to the Bible, "Ah, as the cedars of Lebanon. The new town of Lehanon." The name pleased many of them who had trudged long miles from Lebanon, Connecticut, and they believed that the general had suggested the name as a tribute to them. The area was first settled in 1791 by Joshua Smith of Franklin, Connecticut. Colonel William S. Smith (no known relation to Joshua but his commanding officer during the Revolution), the son-in-law of John Adams, first vice president and second president of the United States, was interested in buying the land. Joshua sent the colonel a firsthand report. The colonel was impressed and purchased the 150,000 acres for $24,375, paying for it in three installments. The colonel had nine brothers who settled in that part of the town which became Smith's Valley, near modern Randallsville. One of these brothers, Justus B. Smith, acted as the colonel's land agent, supervising the division of the land into lots and the sale of these lots to pioneers. Harry E. Hart, in his Lehanon Hill Journal, furnishes the following anecdote about Justus B. Smith, and a visit paid him by Jonathan Bates, one of those pioneer settlers of Lehanon:
It seems that after Jonathan had paid for his land Justus Smith kept putting him off at neglecting to make out a proper deed for the property. After requesting several times that his deed be made out, Jonathan tired of being put off, loaded his rifle and proceeded to Mr. Smiths house. Entering the house Bates stood the loaded rifle near him, folded his arms across his broad chest and demanded a deed to his property be made out forthwith. Smith replied in his usual manner, "I will make your deed tomorrow. I am busy today." "Smith," said Bates, "you will make out my deed today," and reaching for his rifle with meaning "or you are a dead man." There was a wild flurry of papers, as Smith immediately started to make out the deed. Smith's Valley later became a station on the New York, Ontario & Western Railway and served as the southern terminus of the Utica, Clinton & Binghamton Railroad. James H. Smith, in his History of Chenango and Madison Counties, described Smith's Valley as once "the seat of many of Lebanon's important enterprises, it early lapsed into a state of rural repose to be aroused from its Vip Van Winkle period by the introduction of the railroads." Just as with Fenner and Georgetown, Lebanon has been, and continues to be, a farming community. Marion B. Dunham has written:
While the farmers themselves were 'do-it-yourselfers,' some of the specialized jobs were done by artisans who were skilled in that specialty. Lebanon had a tannery, saw mill, cheese factory, black smith, wagon maker, general mechanic, boot- and shoe maker, tailor, dressmaker, milliner, a potashery and a hatter.
Luna M. Hammond also noted that "one of the first, if not the best cotton factories in Madison County, was built on the Chenango River at Middleport ... in 1814. Sheetings and printed goods were made here. Not having machinery for making first quality cloth, they changed [she does not specify exactly when] to woolen manufacture". Much commercial prosperity was brought to Lebanon by the railroad. Although planning and surveying of a line from Syracuse to Earlville was begun in the late 1830s, it was not until the Reconstruction Era following the Civil War, that the Chenango Branch Railroad was completed, on Lincoln's Birthday 1873. The railroad probably had its highest influence on the dairying interests in the town. In a newspaper clipping, Mrs. Warren Catlin wrote of this influence:
In the middle 1890s a man named Eastman built several milk stations close in proximity to the depots along the Chenango Branch Railroad running between Earlville and Syracuse, with the idea of leasing or selling them to milk dealers. One was built at Lebanon where the [Lebanon Dairymen's] League plant now stands. In the early 1900's the first Mutual Company, next the Central Dairy Company, and thirdly Borden owned and operated it.
When the Borden company closed the plant in the winter of 1920, dairy farmers banded together, formed the Lebanon Dairymen's League, bought the plant and reopened it in 1924. Milk was shipped out by train to New York City. The plant burned in 1930, was rebuilt and continued in operation until, by 1952, under Andrew Turner's management, "a total of 79 dairies [were] then delivering milk to the plant."
The introduction of the tank truck (which cut the volume of milk being processed), higher costs, and stiffer competition forced the milk plant, one of the town's last major industries, to close on 1 December 1958. Despite the closing of the town's last major industry, Lehanon still has its productive farms.