A settlement was founded in 1872 about a mile south of present-day Alvan, along the Chicago and Eastern Illinois Railroad, and was called Gilbert in honor of the founder, Alvan Gilbert. In 1875, the new Havana, Rantoul and Eastern Railroad (which became the Illinois Central Railroad) crossed the C&EI north of Gilbert, and the town of Alvan was founded at the intersection. Tradition says that the town's name became Alvin (with an "i" instead of an "a") because the post office misspelled it and refused to correct the error.