Sanderson Texas, the county seat of Terrell County, is on U.S. Highway 90 in Sanderson Canyon in the southwest part of the county. It was founded by Charlie Wilson as Strawbridge. The site served as a division point for the Southern Pacific Railroad, and in 1882 when a roundhouse was built, the name was changed from Strawbridge to Sanderson, after Thomas P. Sanderson, the engineer in charge of construction. A post office was opened in 1883. In early days, Sanderson was an unruly frontier town: Roy Bean operated a saloon there for a short time; Charlie Wilson's Cottage Bar was a favorite spot for railroad workers, cowboys, and local ranchers. When Terrell County was demarked from Pecos County in 1905, Sanderson became the county seat as a result of a countywide election.

On June 11, 1965, Sanderson was devastated by a flash flood. A wall of water roared down Sanderson Canyon into Sanderson, destroying numerous homes and businesses. Twenty-four people died in the flood. Eleven flood-control dams were constructed to protect Sanderson against another such catastrophe. The region is devoted to the raising of livestock, including cattle, horses, polo ponies, burros, sheep, and Angora goats. In 1970 over one million pounds of wool and mohair were shipped out of Sanderson. The town had a population of 1,500 in 1980 and 1,128 in 1990.