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The village is located in the Peoria County portion of Dunlap Township. Dunlap was founded by William Dunlap, who built a mill on the Illinois River in 1835. The town was incorporated as a village on February 9, 1873 and has been growing ever since. In recent years it has become home to many new residents from Chicago because of its proximity to Interstate 74 and O'Hare International Airport (about 45 minutes away). It also serves as an alternative for commuters who work at Caterpillar Inc.'s headquarters or other companies in East Peoria which are about 15 minutes away via I-74 or U.S Route 24/Illinois Route 116 (which runs through downtown).