The junction of the Skeena and the Kitsumkalum Rivers was originally the site of a Tsimshian Indian Village. Fur trading and gold prospecting were the principal activities along the Pacific Shore, including the Skeena area from 1770 to 1900. In the early 1890s, a steamboat route was established up the Skeena as far as Hazelton and Tom Thornhill settled permanently near what is now known as "Little Canyon" on the south side of the Skeena.
In 1905, George Little staked his pre-emption across the Skeena River, and purchased land in what is now known as Terrace. Being a far-sighted person, he gave land to the Grand Trunk Pacific Railway, resulting in the location of a railway station in Terrace, rather than at Kitsumkalum.
Up to World War II, the town existed as a sawmill community, having incorporated in 1927. The population of Terrace in 1951 was 350 people. In the early 1950s, Terrace began to serve as a distribution centre for the new town of Kitimat and became an important wood processing centre with the establishment of the Canadian Cellulose Company.
Terrace was once known as the cedar pole capital of the world. Over 50,000 poles were manufactured annually to supply many parts of this continent with telephone and electric power poles. The world's tallest pole of 50 metres (162 feet) was cut in Terrace and is currently standing in New York City.
The world record spring salmon weighing in at 44.91 kg. (99 lbs.) was caught by a visiting German tourist.