The early settlement was unofficially called Union, but the residents were not happy with that name. The settlers from Pennsylvania wanted a name that reminded them of their native state and those from New England wanted a Yankee-sounding name. A compromise was made—Penn for the Pennsylvanians and Yan for the Yankees. Penn Yan has been the county seat of Yates County since 1824, when the county was chartered.

The opening of the Crooked Lake Canal in 1833 spurred the economy of the region. Many mills sprang up along the canal, including paper mills, plaster mills, potash mills and tanneries. The first railroads came to the area in 1850 with the construction of the Canandaigua and Corning Railroad.

Penn Yan became a grape-growing center to rival Hammondsport, NY, but her neighbor to the south continued to be the winemaking center. Late in the 1800s as many as ten train-loads of grapes steamed out of Penn Yan on the Northern Central and Fall Brook railroads, carrying the label “Keuka.” The “Keuka” brand was known for quality.

On January 10, 1855, the Wesleyan Methodist Church in Penn Yan, Susan B. Anthony led a “woman’s rights” convention.