According to local legend, a small band of Native Americans took flocks from Mission San Luis Rey in the late 18th century and fled into the hills, and Spanish troops pursuing them in 1797 came upon a fertile valley they named Los Vallecitos de San Marcos, the little valleys of St. Mark, for the day of its discovery, April 25. On April 22, 1840, Governor Juan B. Alvarado granted Rancho Vallecitos de San Marcos to his relative Jose Maria Alvarado, who was killed in the Pauma Massacre of 1846. His widow sold the land to Lorenzo Soto, who sold part of it in the late 1850s to Cave Couts, whose family raised livestock there. The first permanent settler was Major Gustavus French Merriam of Topeka, Kansas, who homesteaded 160 acres in the north Twin Oaks Valley and produced wine and honey.
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German and Dutch immigrants arrived in the early 1880s. In 1883 John H. Barham founded the area's first town a few miles south, at today's Rancho Santa Fe Road and San Marcos Boulevard, and by 1884 Barham had a post office, blacksmith, feed store and weekly newspaper. In 1887 the San Marcos Land Company bought almost all the former Couts land and divided it into tracts, drawing homeseekers to the hills.
The original town of San Marcos grew about a mile north of Barham, at what is now Grand Avenue and Rancho Santa Fe Road. In 1887 the Santa Fe Railroad laid its tracks through the valley, though to residents' disappointment a mile from the town center. By 1896 San Marcos had stores, a post office, a blacksmith and a depot, and the school started at Barham in 1886 had moved there as Barham faded.
Sources
Wikipedia: San Marcos, California