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We don't know.
In one sense the oldest European settlement in the modern day state of Illinois is Peoria, which was founded in 1691.
However, the town is named after the Peoria tribe, who were already living there near there in towns of their own. We don't really know which of those may have come first; the Cahokia Mounds are the remnants of a large city that started around 600 AD, but there is evidence of earlier temporary habitation at the site at least as far back as 1200 BC.
In another sense, it's a tie between many towns; any settlement that existed prior to December 3, 1818 can legitimately claim to be tied for the title of "First Town in (the state of) Illinois."
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