The first settlers in the area were Gustaf Unonius; his wife, Charlotta Margareta Ohrstromer; her nursemaid; Christine Soedergren; Carl Groth; and Wilhelm Pearmain.
The village was formed from the Town of Merton in 1928 by wealthy Milwaukeeans who owned summer homes in the area and were concerned about the level of police protection provided. Forming their own village allowed them to have their own police department. The town of Merton, which objected to the formation of the village because of the loss of tax revenue, filed suit to prevent the incorporation. It was supported by hundreds of town residents who filed petitions with the court. In January, 1928, the court determined that the village of Chenequa could incorporate. The judge addressed the local residents' complaint that the public would be shut off from access to the lake by stating that, "There is no merit to such contention. The lake is now touched by a public road, it has three hotels, where the public is invited and welcome to the lake. Besides, the county board can supervise any plats and can open up to the public any lake by the laying out and building of public roads."
Many of the residents who own property around Pine Lake and Beaver Lake are descendants of Milwaukee and Chicago industrialists who built their summer mansions there during the late 1800s.