Several mountains have timberlines: Mount Mansfield, the highest mountain in the state, as well as Killington are examples. About 77 percent of the state is covered by forest; the rest is covered in meadow, uplands, lakes, ponds and swampy wetlands. Areas in Vermont administered by the National Park Service include the Appalachian National Scenic Trail and the Marsh-Billings-Rockefeller National Historical Park in Woodstock.

The second European to see Vermont is thought to be Jacques Cartier, in 1535. On July 30, 1609, French explorer Samuel de Champlain claimed the area of what is now Lake Champlain, giving to the mountains the appellation of les Verts Monts (the Green Mountains).

France claimed Vermont as part of New France, and erected Fort Sainte Anne on Isle La Motte in 1666 as part of the fortification of Lake Champlain. This was the first European settlement in Vermont and the site of the first Roman Catholic Mass. During the latter half of the 17th century, non-French settlers began to explore Vermont and its surrounding area. In 1690, a group of Dutch-British settlers from Albany under Captain Jacobus de Warm established the De Warm Stockade at Chimney Point (eight miles or 13 km west of present-day Addison). This settlement and trading post was directly across Lake Champlain from Crown Point, New York (Pointe à la Chevelure).

In 1731, the French arrived. Here they constructed a small temporary wooden stockade (Fort de Pieux) on what was Chimney Point until work on Fort St. Frédéric began in 1734. The fort, when completed, gave the French control of the New France/Vermont border region in the Lake Champlain Valley and was the only permanent fort in the area until the building of Fort Carillon more than 20 years later. The government encouraged French colonization, leading to the development of small French settlements in the valley. The British attempted to take the Fort St. Frédéric four times between 1755 and 1758; in 1759, a combined force of 12,000 British regular and provincial troops under Sir Jeffrey Amherst captured the fort. The French were driven out of the area and retreated to other forts along the Richelieu River. One year later a group of Mohawks burnt the settlement to the ground, leaving only chimneys, which gave the area its name.

The first permanent British settlement was established in 1724, with the construction of Fort Dummer in Vermont's far southeast under the command of Lieutenant Timothy Dwight. This fort protected the nearby settlements of Dummerston and Brattleboro. These settlements were made by the Province of Massachusetts Bay to protect its settlers on the western border along the Connecticut River. The second British settlement was the 1761 founding of Bennington in the southwest.

During the French and Indian War, some Vermont settlers, including Ethan Allen, joined the colonial militia assisting the British in attacks on the French. Fort Carillon on the New York-Vermont border, a French fort constructed in 1755, was the site of two British offensives under Lord Amherst's command: the unsuccessful British attack in 1758 and the retaking of the following year with no major resistance (most of the garrison had been removed to defend Quebec, Montreal, and the western forts). The British renamed the fort Fort Ticonderoga (which became the site of two later battles during the American Revolutionary War). Following France's loss in the French and Indian War, the 1763 Treaty of Paris gave control of the land to the British.

The Battles of Bennington and Saratoga are recognized as the turning point in the Revolutionary War because they were the first major defeat of a British army and convinced the French that the Americans were worthy of military aid. Stark became widely known as the "Hero of Bennington", and the anniversary of the battle is still celebrated in Vermont as a legal holiday known as "Bennington Battle Day." Under the portico of the Vermont Statehouse, next to an heroic granite statue of Ethan Allen, there is a brass cannon that was captured from the British troops at the Battle of Bennington.

An 1854 Vermont Senate report on slavery echoed the Vermont Constitution's first article, on the rights of all men, questioning how a government could favor the rights of one people over another. The report fueled growth of the abolition movement in the state, and in response, a resolution from the Georgia General Assembly authorizing the towing of Vermont out to sea.

Vermonters independently elect a state governor and lieutenant governor every two years (as opposed to every four years, which is the most common term length for a governor of a U.S. state). The current governor of Vermont is Jim Douglas, who assumed office in 2003. Vermont does not have a term limit for the governor.

Vermont's state legislature is the Vermont General Assembly, a bicameral body composed of the Vermont House of Representatives (the lower house) and the Vermont Senate (the upper house). The Senate is composed of 30 state senators, while the House of Representatives has 150 members. Like the governor, members of the General Assembly serve two-year terms.

The Vermont Supreme Court is the state supreme court, made up of five justices who serve six year terms. Superior courts in the state are made up of eight judges serving a term of six years. Appointments to the state supreme court, superior court, and district courts are made by the governor, from a list of names submitted by the state's Judicial Nominating Committee and then are confirmed by the Senate. At the end of each six year term, the Gereral Assembly votes by joint ballot (each member, senator or representative, getting one vote) on whether to retain the judge or justice (known as a judicial retention vote). Judges on lower courts are elected on a partisan ballot. The Vermont Constitution spells out the process of judicial appointment and retention in Chapter 2, Sections 32 thru 35, 50 and 51.

The Vermont Constitution outlines and guarantees broad rights for its citizens. Even in the eighteenth century it was seen as being among the most far reaching in the new world and in Europe, and it predated the Bill of Rights by a dozen years. The Constitution's first chapter, "Declaration of the Rights of the Inhabitants of The State of Vermont" prohibits slavery, indentured servitude, and allowed for universal manhood suffrage, regardless of property ownership. The Declaration of Rights set in place broad protections of religious freedom and conscience while erecting a strong firewall between church and state, by prohibiting establishment or promotion of any faith by the government, or compulsion to worship. The "Declaration of the Rights of the Inhabitants of The State of Vermont" is believed to have been a model for France's Déclaration universelle sur des droits de l'homme (Universal Declaration of the Rights of Man).

Vermont is represented (after the 2006 elections and effective in 2007) in the U.S. Senate by Patrick Leahy, a Democrat, and Bernie Sanders, an independent, caucusing with the Democrats. Vermont made history with Sanders's election as the first Democratic Socialist to be elected to the Senate. Sanders has served as Vermont's sole US Representative from 1991-2007 and also served as mayor of Burlington (Vermont's largest city) from 1981-1988. In the U.S. House of Representatives, Vermont's single congressional district is represented by Peter Welch, a Democrat. Among Vermont's distinguished public servants, U.S. Senator Winston Prouty (R) gained national prominence as an early critic of Senator Joseph McCarthy. Upon his departure from the Republican Party, Senator Jeffords cited the late Senator Prouty, a member of Vermont's most prominent political family, for the latter's legendary spirit of independence. George Aiken (R), who served as senator from 1941 until 1975, was equally prominent; he is perhaps best known for his proposal that the United States declare victory in Vietnam and leave.

Of the remaining industries, dairy farming is the primary source of agricultural income. An important and growing part of Vermont's economy is the manufacture and sale of artisan foods, fancy foods, and novelty items trading in part upon the Vermont "brand" which is managed by the Vermont Secretary of Agriculture and fiercely defended by the Vermont Secretary of State and Attorney General. Examples of these specialty exports include Cabot Cheese, the Vermont Teddy Bear Company, Fine Paints of Europe, Vermont Butter and Cheese Company, several micro breweries, ginseng growers, Burton Snowboards, Lake Champlain Chocolates, King Arthur Flour, and Ben and Jerry's Ice Cream. Vermont's Agency of Agriculture, Food & Markets maintains the highest dairy standards in the U.S. Only France's Minister of Agriculture, Food, Fishing and Rural Affairs (see Minister of Agriculture (France)) has standards for butterfat content equal to Vermont's.

Captive insurance plays an increasingly large role in Vermont's economy. With this form of alternative insurance, large corporations or industry associations form standalone insurance companies to insure their own risks, thereby substantially reducing their insurance premiums and gaining a significant measure of control over types of risks to be covered. There are also significant tax advantages to be gained from the formation and operation of captive insurance companies. According to the Insurance Information Institute, Vermont in 2004 was the world's third-largest domicile for captive insurance companies, following Bermuda and the Cayman Islands.

Tourism is the state's largest industry. In the winter, world famous ski resorts like Stowe, Killington Ski Resort, Mad River Glen, Sugarbush, Stratton, Jay Peak, Okemo, and Bromley draw skiers from around the globe, although their largest markets are Boston, Montreal and the New York metropolitan area. In the summer, resort towns like Stowe, Manchester, and Woodstock draw visitors looking for a mountain vacation. Resorts, hotels, restaurants, shops and attractions employ many people year-round.