Before being named Prosperity, the area was called Frog Level due to its low-lying location and large numbers of frogs living in adjacent ponds. Captain Matthew Hall settled in the area in 1827, and established a store and post office in the early 1830s. The town expanded with the arrival of the railroad in the 1850s, and in later decades would profit from its location along two major rail lines. After a fire destroyed part of the town in 1873, the town's residents voted to change the name of the town to "Prosperity" after the Prosperity Associate Reformed Presbyterian Church. The Jacob Bedenbaugh House, Howard Junior High School, and Prosperity Cemetery are listed on the National Register of Historic Places.
As of the census of 2000, there were 1,047 people, 415 households, and 293 families residing in the town. The population density was 495.9 people per square mile. There were 456 housing units at an average density of 216.0 per square mile. The racial makeup of the town was 53.20% White, 44.79% African American, 0.67% Asian, 0.48% Pacific Islander, 0.19% from other races, and 0.67% from two or more races. Hispanic or Latino of any race were 2.39% of the population. There were 415 households out of which 33.5% had children under the age of 18 living with them, 46.0% were married couplesliving together, 19.5% had a female householder with no husband present, and 29.2% were non-families. 26.3% of all households were made up of individuals and 13.3% had someone living alone who was 65 years of age or older. The average household size was 2.51 and the average family size was 3.01. In the town, the population was spread out with 27.8% under the age of 18, 7.1% from 18 to 24, 29.1% from 25 to 44, 22.0% from 45 to 64, and 14.0% who were 65 years of age or older. The median age was 35 years. For every 100 females, there were 78.4 males. For every 100 females age 18 and over, there were 77.5 males. The median income for a household in the town was $30,875, and the median income for a family was $39,261. Males had a median income of $31,406 versus $19,226 for females. The per capita income for the town was $15,323. About 14.6% of families and 16.9% of the population were below the poverty line, including 22.5% of those under age 18 and 14.9% of those age 65 or over.
