As indicated in its earliest records, kept by Councilor Shara Graye, Freehold was originally as much the result of coincidence and providence as any sort of intention. No plans were ever made to found a settlement either in the Shaar or in the precise location where the village now stands. Instead, Freehold began primarily as the common resting place of several caravans and numerous travelers who happened to make camp in the same general area.

While the frontier settlement would not receive a name immediately, it was more or less officially founded on 5 Eleasis, 1372DR. Caravans from Cormyr, Sembia, Mulhorand, and Dambrath, attended by entourages of unassociated travelers, met near the Liontongue River, southwest of Aerilpar Forest. Nearly all of the original settlers cited differing reasons for abandoning their original homelands and seeking out new lives, but few if any of them had set out with the specific notion of building an altogether new home in mind; most of the first wave of Freeholders (as well as the majority of later settlers) were fleeing war in other countries or seeking solitude beyond the political borders of firmly-claimed lands.

Since the development of a heretofore nonexistent civilization was something neither planned for nor expected by the majority of the settlers, there was a certain amount of undeniable anarchy and sociopolitical tension when the founders decided to band together and set down roots for the sake of common defense and safety in numbers. Various suggestions were quickly pitched, but fortunately for the community, most of those present at the time were of necessity concerned with subjects like water, food, waste disposal, shelter, and security.

While the notion of some form of leadership was verifiably raised first by Raxam Kelastro, which immediately led to a short but nearly violent debate that almost spelled an end to the fledgling village, a compromise was reached following Lysander Arkaine's proposal of a temporary committee model, the acceptance of which led to a relatively quick poll of the settlers and the establishment of the First Freehold Council.

Under the direction of the newly-elected administrators, with significant input and assistance from other capable settlers, labor was divided and purposed for the various tasks designated as immediate in importance, and so Freehold quietly began. Danger found the settlers quickly, however: On 19 Eleasis, 1372DR, the tiny village was attacked by gnoll slavers chasing escapees from a Mulhorandi caravan they had recently raided. The sole survivor stumbled into Freehold by accident, following the smoke from the settlers' campfires, and begged for assistance. The name "Freehold" was adopted by the community after it successfully repelled the slavers' raid.