Tumwater is a city in Thurston County, Washington, United States. It lies near where the Deschutes River enters Budd Inlet, the southernmost point of Puget Sound. The population was 17,371 at the 2010 census. Thurston County, which includes the cities of Lacey, Olympia and Tumwater, has a population of 252,264. Tumwater was founded next to the falls of the Deschutes River at the south end of Puget Sound as New Market in 1846 by a group of pioneers led by Michael Simmons and George Bush. It was the first American settlement on Puget Sound.