The name of the community comes from the name of an old railroad station. According to one account, the station was named "Daddy's Bag", after a colorful railroad worker who lived there, which was eventually shortened to "Bagdad". Another account suggests that a person with a speech impediment named it "Granddad".[2] Yet another story has it that the young speech-impaired son of a local feed merchant, whenever a customer walked in the door, would holler to his father, "Bag, dad!".[3]
Bagdad is the hometown of former governor of Kentucky Martha Layne Collins, Kentucky's first female governor.