Alderwood is named after Etobicoke, the municipality of which it originally was a part, which is a native word meaning "place where the alder trees grow."
With Long Branch, Alderwood was originally part of Col Sam Smith's land. In 1850, Archibald Cameron purchased four farm lots of this land comprising most of the area that is now Alderwood; he built his home
'Ashfield' on what is now Beta Street. In 1874 Archibald Cameron was facing bankruptcy and sold his farm lots to Daniel Horner, who later served as a prominent member of Etobicoke Township's Council; Horner Avenue is named after him. The naming of Alderwood's main street was a hotly debated issue in the early community between the Brown and O'Connor families; today it is called Brown's Line.
In 1967 the independent municipalities formed out of Etobicoke Township were re-amalgamated with Etobicoke to create the Borough of Etobicoke which became a city in 1983.
Alderwood is characterized by single family homes, many of which were constructed at the end of the Second World War.