Island Pond was the birthplace of popular singer and entertainer Rudy Vallee.
According to the United States Census Bureau, the town has a total area of 11.7 km² (4.5 mi²). 10.8 km² (4.2 mi²) of it is land and 0.9 km² (0.3 mi²) of it is water. The total area is 7.32% water.
As of the census of 2000, there are 849 people, 374 households, and 228 families residing in the town. The population density is 78.4/km² (202.9/mi²). There are 556 housing units at an average density of 51.4/km² (132.9/mi²). The racial makeup of the town is 94.23% White, 0.12% African American, 1.06% Native American, 0.59% Asian, 0.00% Pacific Islander, 0.00% from other races, and 4.00% from two or more races. 0.12% of the population are Hispanic or Latino of any race.
There are 374 households out of which 28.3% have children under the age of 18 living with them, 44.4% are married couples living together, 13.4% have a female householder with no husband present, and 38.8% are non-families. 32.6% of all households are made up of individuals and 19.0% have someone living alone who is 65 years of age or older. The average household size is 2.27 and the average family size is 2.88.
In the town the population is spread out with 24.0% under the age of 18, 8.7% from 18 to 24, 22.6% from 25 to 44, 25.3% from 45 to 64, and 19.3% who are 65 years of age or older. The median age is 42 years. For every 100 females there are 94.3 males. For every 100 females age 18 and over, there are 89.1 males.
The median income for a household in the town is $25,547, and the median income for a family is $31,250. Males have a median income of $25,577 versus $23,542 for females. The per capita income for the town is $13,207. 19.4% of the population and 14.9% of families are below the poverty line. Out of the total people living in poverty, 28.8% are under the age of 18 and 18.0% are 65 or older.