Penelope is on Farm Road 308 fifteen miles south of Hillsboro in south central Hill County. It was settled in the early 1890s, when the Seley family established the Zee Vee Ranch a half mile from the town's present site. In 1902 the tracks of the International-Great Northern Railroad reached the area. This initiated the purchase of land beside the tracks by the Smith Land Improvement Company, which laid out a townsite and named it for the daughter of the president of the railroad, Penelope Trice. Currently there is one church and school in town.