The town's name is derived from "ohkotok", the Blackfoot First Nation word for "rock". The name may refer to Big Rock, the largest glacial erratic in the Foothills Erratics Train, situated about 7 km (4.3 mi) west of the town.

Before European settlement, journeying First Nations used the rock as a marker to find the river crossing situated at Okotoks. The tribes were nomadic and often followed large buffalo herds for their sustenance. David Thompson explored the area as early as 1800. Soon trading posts were established, including one built in 1874 at the Sheep River crossing in the current town. This crossing was on a trade route called the Macleod Trail, which led from Fort Benton, Montana to Calgary.

In 1879, the area saw the killing of the last buffalo. Government leasing of land for one cent per acre ($2.47/km²) began in 1880. This created a major change in the region. The first settlers arrived in 1882.

A community grew around a sawmill that was established in 1891, and it would grow in size. The last stagecoach stopped in Okotoks in 1891 when rail service between Calgary and Fort Macleod replaced horse-drawn travel. By 1897 the community name had changed three times, first from Sheep Creek, to Dewdney after Edgar Dewdney the Lieutenant Governor of the Northwest Territories, and later being informed by post office authorities in Ottawa of an older settlement named Dewdney in Lower Mainland, British Columbia, the name Okotoks was chosen by local businessman John Lineham. The rail line is still a main line south to the U.S. border, but the last of the passenger service (Dayliner unit) ended in 1971.

In 2007, the energy efficient Drake Landing Solar Community was established in Okotoks.

Heritage conservation

Numerous old buildings have been restored, and one house was even resituated[19] blocks away to avoid destruction by the widening of the highway through the townsite.

Land annexation

Effective July 1, 2017 the Government of Alberta approved the annexation of approximately 1,950 hectares (4,900 acres) of land. Okotoks and the Municipal District of Foothills reached an agreement more than three years after the town first issued its notice of intent to seek more land to accommodate its long-term growth plans. Okotoks will gain a 60-year land supply that will enable the Town to develop housing and other services over the next several decades.

Water conservation

Although the Sheep River runs through Okotoks year round, artesian wells near the river supply the town with its water. In September 1998, Okotoks became one of the first communities in Canada to recognize its environmental limits to growth were restricted by the carrying capacity of the local watershed. In concern for the supply of water, the town announced a unique and controversial suggestion of capping its population at 25,000 residents. In an interview on The Current, Mayor Bill McAlpine stated that this objective may be politically difficult due to the surrounding region.

Climate

Okotoks experiences a humid continental climate (Köppen Dfb), with generally warm summers and long, cold winters. Rainfall is usually limited to the summer, with most of it falling between the months of May and September.

In the 2021 Census of Population conducted by Statistics Canada, the Town of Okotoks recorded a population of 30,405 living in 10,476 of its 10,750 total private dwellings, a change of 4.8% from its 2016 population of 29,016. With a land area of 38.55 km2 (14.88 sq mi), it had a population density of 788.7/km2 (2,042.8/sq mi) in 2021.

In the 2016 Census of Population conducted by Statistics Canada, the Town of Okotoks recorded a population of 28,881 living in 9,667 of its 9,840 total private dwellings, a 17.8% change from its 2011 population of 24,511. With a land area of 19.63 km2 (7.58 sq mi), it had a population density of 1,471.3/km2 (3,810.6/sq mi) in 2016.

The population of the Town of Okotoks according to its 2015 municipal census is 28,016, a 2.5% change from its 2014 municipal census population of 27,331. At its current population, Okotoks is the largest town in the province and is eligible for city status. According to Alberta's Municipal Government Act, a town is eligible for city status when it reaches 10,000 residents.

Almost 3% of Okotoks residents identified themselves as aboriginal at the time of the 2006 census. About 93% of residents identified English as their first language while 1.4% identified French and 1.0% identified German as their first language learned. The next most common languages were Spanish, Tagalog, Chinese, Korean, and Slovak.

The sawmill that was established by John Lineham along the Sheep River in 1891 operated for 25 years and was a major part of the local economy. At one time it employed 135 people, producing an average of 30,000 feet (9,000 m) of lumber per day. The growth of the Canadian Pacific Railway created a demand for railway ties and the mill helped meet that demand. Logs were brought down from the west via the Sheep River. The mill has long since disappeared but one building (one of the oldest remaining in the township) still stands. It housed an award-winning (butter) dairy from the 1920s to the 1940s. It currently houses a law office and restaurant. In May 2015 the Old Creamery was severely damaged following a suspected arson attack. On 15 June 2015 the Town Council voted to demolish the building.

In 1900, just west of Okotoks, four brick-making plants were opened. Many of the first brick buildings in Okotoks (of which a number still exist) were constructed using locally-made brick. The industry reached its peak in 1912, when twelve million bricks were manufactured. The outbreak of World War I caused the shutdown of “Sandstone” as it was known.

By 1906 the population had hit 1900, a figure that would not be reached again until 1977.

Oil was discovered west of Okotoks on October 7, 1913. Okotoks became the supply centre. In its heyday, from 1913 to the 1960s, Okotoks was busy with horses, wagons, and transports hauling all types of equipment to the oil fields, and crude oil back through town to refineries in Calgary.

The Texas Gulf sulphur plant (known as CanOxy) opened in 1959, employing 45 people. It was not unusual to see the bright yellow, three-story high, block-long, block-wide pile of sulphur waiting to be melted or ground up and poured into railway cars.

Since 1974, Okotoks has been hosting a collector car auction in late May. It is the longest running collector car auction in Canada.

Okotoks was one of the few communities its size with its own airport. A number of small air shows were held there over the years. It was the home of an aircraft charter company, flight school, and a helicopter flying school. The site has now evolved into an airpark community called the Calgary/Okotoks Air Park, where the property owners, if they wish, can build homes with attached hangars for their private planes. There is also a small private aerodrome, Calgary/Okotoks (Rowland Field) Aerodrome. Otherwise, like other communities in the vicinity of Calgary, it is served by Calgary International Airport.

• Dramavita Studio Theatre 
• Alberta Dance Academy
• Okotoks Martial Arts
• Okotoks Mavericks (swimming)
• Okotoks Stingrays (swimming)
• Mountain Shadows Gymnastics Club
• Okotoks Scouts