Penobscot was first settled in 1760 as part of the Marsh Grant (grants to veterans of the last war against the French) referred to as Township #3.  In 1787, when it was incorporated, it included parts of Brooksville and Castine until 1796.  The town is located along the Bagaduce River, which was important in the early years for trading and military endeavors, but today is well known for kayaking and boating.