Sweetwater received a U.S. post office in 1879. The Texas and Pacific Railway started service in 1881, with the first train arriving on March 12 of that year, beginning Sweetwater's long history as a railroad town. To encourage the railroads, Sweetwater increased its water supply by building a small town lake in 1898, and three larger lakes thereafter. Construction began on the Kansas City, Mexico and Orient Railway in 1903. Sweetwater became a railroad town, with businesses and homes built along the rail line. Rail passenger service was discontinued in 1969.

Gulf Refinery operated there from 1929 to 1954, and at one time the town was a large telegraph center. The International Harvester Company operated a factory in Sweetwater from 1920 to 1950. Gypsum plants, apparel manufacturers, cement plants, cotton compresses, a cottonseed oil mill, and packing companies were among the nearly 250 businesses operating there from the 1970s. Many still operate today. Sweetwater remains a production hub for cotton, oil, and cattle. The population of Sweetwater has remained steady between 11,000 and 13,000 since 1940.

At Sweetwater during World War II, the Women Airforce Service Pilots (WASPs) were trained under the direction of the famed aviatrix Jacqueline Cochran at Sweetwater's Avenger Field. These WASPs were the first women to fly American military aircraft. The military airstrip closed abruptly at the end of the war, but pilots flying over Sweetwater can still land at Avenger Field the Sweetwater Airport (SWW). The National WASP WWII Museum is located at Avenger Field.The WASP women were not recognized for having served in the armed forces until 1977, when U.S. Senator Barry M. Goldwater of Arizona and Colonel Bruce Arnold, late son of General Hap Arnold, persisted in obtaining their official recognition as military veterans. In 1970, the field became the site of Texas State Technical College in Sweetwater.

Sweetwater also has a Pioneer Museum, with display rooms depicting the lives of early settlers with extensive photograph files, farm and ranch exhibits, Indian artifacts, and WASP exhibits.

Sweetwater has a hospital (founded 1976), an 18-hole golf course (opened 1958), a local newspaper (founded 1881), a municipal auditorium (whereh Elvis Presley once performed), a historic renovated movie theater, and a large public swimming pool, as well as public fishing and recreational facilities at Lake Sweetwater.

Sweetwater High School has a rich tradition in amateur sports. SHS's football teams play in the Mustang Bowl, built in the 1930s by the CCC. Sweetwater's football tradition has produced 627 wins, fourth-most all-time in Texas class 3A rankings. Football legend Sammy Baugh played for Sweetwater in the Mustang Bowl, and is a member of the UIL All Century Team.Kathleen Darnell won the 1927-1928 (all schools) State Championship in tennis. Walter Romine won the 1961-62 3A Tennis Singles Championship and Fred Scott and Mike Boles won the 1971-1972 3A Doubles Championship. In 1979-80, Sylvia Layfield and Connie Weber won the State 3A Doubles title. In golf, Sweetwater won back-to-back 3A State Golf Championships in 1971-72 and 197273, with Scott Morgan winning the 1971-72 3A Individual state title. Sweetwater again won the 3A State Golf Championship in 2000-2001. Sweetwater won the Texas 4A State Football Championship in 1985, beating Austin Westlake and then Tomball to claim the title. Sweetwater's girls basketball team competed in the 1984-85 4A State Championship game against Waco Richfield. SHS basketball star Nicole "Nikki" Heath was a starter on Texas Tech University's 1993 National Championship team. In track and field, Sweetwater won the 1983-84 Girls 4A State Team Championship and the Sweetwater's Individual State Champions:

Parts of the south side of Sweetwater were devastated by an estimated EF3 tornado that swept through town early in the morning of April 19, 1986.

Sweetwater is the center of the Western Hemisphere's leading wind power generation region. It is sometimes called the "Wind Turbine Capital of Texas", which does not regulate wind power. About 1,330 direct wind-related jobs were created in Nolan County alone (in 2009), with almost $18,000,000 in annual landowner royalties and over $12,000,000 in annual local school taxes (2007).

The world's largest rattlesnake Round-Up has been held annually by the Sweetwater Jaycees on the second weekend in March since 1958.

According to Tom Henderson, a member of the Sweetwater Chamber of Commerce Board of Directors:

"If you're bored here, it's your own fault."