The most probable hypothesis links the toponym to the formation of clouds around the top of the mountains. Very weak is the explanation provided by Gina Fasoli who, placing the locality along the border of the Lombard Kingdom, brings it closer to the custom of reporting smoke for defensive purposes.
There are very few finds concerning the most ancient history, while references about the medieval period abound. At the beginning of the 12th century each hamlet constituted a fiefdom gravitating around the municipality of Treviso: the Maltraversi (also called da Monfumo) settled in Monfumo and the family of the same name in Castelli. The two families lived in their respective forts, which must have risen where today the parish churches of the towns are located.
Maltraversi and Castelli were linked to the Ghibelline faction and in the 13th century they sided with the Scaligeri opposing the Guelphs represented by the Caminesi and the bishops of Feltre and Treviso. Their defeat, however, was sanctioned by the conquest of the Serenissima, which abolished the fiefdoms by establishing the podesteria of Asolo, governed by Venetian rectors.
The present-day municipality of Monfumo was established in 1810 during the Napoleonic domination, separating the territory from that of Asolo. In 1928 the institution was suppressed and re-aggregated in Asolo, and then definitively returned to its autonomy in 1945.