Local lore claims that a group of Misery Native Americans, a branch of the Ojibwe or Chippewa nation, settled on the southern shore of Lake Superior in the area in 1845.
Toivola was once a lumbering camp, and established as a village in 1894. The community initially struggled for a number of years, and the individuals who had settled in Toivola were poverty-stricken and often paid considerably less than people in other areas. The early inhabitants of the area heavily depended upon the logging industry for their daily earnings. Finally, individuals from Finland reached the area and began to settle themselves there.
During one period, this community was host to more than 60 different farms.
After years of being inhabited Toivola did not have a community name, and one early pastor, A.L. Heideman, thought it would be a fine idea to name the community Urhola, after a Finnish word meaning the "Place of Heroes". This pastor thought it was quite fitting as he perceived only heroes could live within Urhola because it was neighbored by only wilderness. Baptismal certificates of children born during this time list the location as Urhola. However, a local herbalist, Mrs. Maria Kallioinen, had been in favor of the name Toivola from the early years; apparently her choice was the more popular.