c. 1200, "main division of a book," from Old French chapitre (12c.) "chapter (of a book), article (of a treaty), chapter (of a cathedral)," alteration of chapitle, from Late Latin capitulum "main part, chapter of a book," in Medieval Latin also "a synod or council," literally "little head," diminutive of Latin caput "head," also "leader, guide, chief person; summit; capital city; origin, source, spring," figuratively "life, physical life;" in writing "a division, paragraph;" of money, "the principal sum," from PIE root *kaput- "head."
Sense of "local branch of a society or organization" (1815) is from the Church sense "body of the canons of a cathedral or collegiate church, members of a religious order" (late 14c.), which seems to trace to the convocations of canons at cathedral churches, during which the rules of the order by chapter, or a chapter (capitulum) of Scripture, were read aloud to the assembled. Chapter and verse "in full and thoroughly" (1620s) is a reference to Scripture.
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