Colon was first established in 1879, then relocated to its present site in 1886 when the railroad was extended there, and was incorporated as a village in 1894. It was named after Colon, Michigan, by the town's first postmaster, a native of that state.

Colon, population 107 in 2020, sits seven miles north of the county seat of Wahoo and is the birthplace of American lawyer and civil servant Emmett Louis Murphy.