Yalobusha is a native American word meaning "tadpole place," and before the county was formed, it was the home of both the Choctaw and Chickasaw Indian tribes.
In 1816, General Andrew Jackson ordered the surveying of the Choctaw-Chickasaw Line. The line as surveyed cut almost a perfect diagonal across the area of the present day Yalobusha County. In 1830, the Choctaws ceded their Mississippi lands to the United States in the Treaty of Dancing Rabbit Creek. Two years later, the Chickasaw signed the Treaty of Pontotoc, ceding their lands to the United States. Both tribes moved west to new lands in present day Oklahoma.
In 1833, the Mississippi Legislature authorized the formation of 17 counties, including Yalobusha, on what until recently had been Indian land. Yalobusha County was officially organized and its first officials elected on February 21, 1834. The first Board of Police (Supervisors) held its first meeting at Hendersonville, then the largest town in the county. Hendersonville had been established in 1798 by John Henderson, a Presbyterian missionary, who was one of the first white men to settle in the area.
At its first meeting the Board of Police solicited donations of land for a county seat. At its second meeting, the Board selected the site, naming it Coffeeville in honor of General John Coffee, who had represented the United States in the treaties with the Choctaws and the Chickasaws. The next meeting was held in the new settlement, and in 1837 the first courthouse was built.
The Illinois Central Railroad built a branch line from Jackson, Tennessee to Grenada, passing through Water Valley and Coffeeville, in the late 1850s. ICRR officials wanted to set up shops in Coffeeville, but could not obtain the property they wanted. Residents of the fledging town of Water Valley offered to donate the needed land to the railroad; therefore, the shops were located there, and Water Valley quickly became the largest town in the county. It was officially chartered in 1858. With the completion of the railroad from New Orleans to the Ohio River, Water Valley was an important railroad community on the Mississippi Central railroad at the outset of the Civil War.
In 1862, during Union General Ulysses S. Grant's overland attempt to capture Vicksburg, the men in blue captured Water Valley, but were defeated in battle by the Confederates north of Coffeeville, and Grant was forced to withdraw. Grant's men burned most of the town during their retreat.
After the war, the ICRR railroad shops were built at Water Valley, bringing a large influx of new residents to the town. In 1867, Yalobusha County's first manufacturing industry, Yacona Mills, was the world's largest manufacturer of twine.
In March, 1873, Yalobusha County was divided into two judicial districts, and Water Valley was named the county seat of the second judicial district. Because the town overlapped the Yalobusha-Lafayette County line, the legislature gave Yalobusha a two-mile strip of land from the southern portion of Lafayette County.
In 1889, Coffeeville's second courthouse, which had been built in 1840 at a cost of $25,000, burned down. A new courthouse, also costing $25,000, was built in 1890. That year, the county population was 16,629.
A new courthouse was built in Water Valley in 1896, but 16 years later it was destroyed by an accidental fire The second judicial district offices were moved to the Water Valley City Hall, but within a month, it too burned. The courthouse was restored after the fire, and a third floor was added but never completed.
Between 1926–1928, Yalobusha County suffered two tremendous economic setbacks. In April 1926, Yacona Twine Mill, which had employed approximately 450 people, was destroyed by fire. The following year, the ICRR began moving its railroad shops from Water Valley to Paducah, Kentucky. By the end of 1928, these shops, which had at one time employed over 800 people in Water Valley, were completely closed.
In 1931, the first Watermelon Carnival was held in Water Valley. It was a great success, bringing 20,000 visitors to Water Valley. The Watermelon Carnival became an annual event bringing national recognition to Water Valley, which in 1932 proclaimed itself the "Watermelon Capital of the World". The Watermelon Carnival was suspended at the beginning of World War II in December 1941 and was not resumed until 1980. Since then it has been an annual event the first Saturday in August.
The county has a total area of 495.00 square miles of which 467.12 square miles is land and 27.88 square miles (5.63%) is water. The population recorded in the 1840 Federal Census was 12,248. The population peaked in 1910 at 21,519. The 2010 census recorded 12,678 residents in the county.
Neighboring counties are Lafayette County (northeast), Calhoun County (east), Grenada County (south), Tallahatchie County (west), and Panola County (northwest). The co-county seats are the town of Coffeeville and the city of Water Valley. Other communities in the county include Oakland, Tillatoba, Gatewood, Palestine, Velma, Bryant, Bruce Junction, Gums, Spearman, Tyson, Benwood, Pine Valley, and Scobey.