Prior to the Black Hills Gold Rush of 1876, the area was used by Native Americans (primarily bands of Sioux but others also ranged through the area) who would spear fish in the creek (hence the name of the creek and subsequently the town). Once the gold rush started, the city was founded in 1876 at the mouth of Spearfish Canyon, and was originally called Queen City. Spearfish grew as a supplier of foodstuffs to the mining camps in the hills. Even today, a significant amount of truck farming and market gardening still occurs in the vicinity.
In 1887, the accepted history of gold mining in the Black Hills was thrown into question by the discovery of what has become known as the Thoen Stone. Discovered by Louis Thoen on the slopes of Lookout Mountain, the stone purports to be the last testament of Ezra Kind who, along with six others, entered the Black Hills in 1833 (at a time when whites were forbidden by law and treaty from entering the area), "got all the gold we could carry" in June 1834, and were subsequently "killed by Indians beyond the high hill." While it may seem unlikely that someone who has "lost my gun and nothing to eat and Indians hunting me" would take the time to carve his story in sandstone, there is corroborating historical evidence for the Ezra Kind party.
In the 20th century, the history of Spearfish was tied very closely to mining and tourism. Architect Frank Lloyd Wright, who visited Spearfish Canyon in 1935, later called the area "unique and unparalleled elsewhere in our country," and wondered, "How is it that I've heard so little of this miracle and we, toward the Atlantic, have heard so much of the Grand Canyon when this is even more miraculous?"
The Homestake Sawmill (previously part of Pope and Talbot, now owned by Neimen Forest Products) was built to supply timbers for the Homestake Mine in Lead (closed January 2002). In 1938, Joseph Meier brought the Luenen Passion Play to settle permanently in Spearfish and become the Black Hills Passion Play, drawing thousands of visitors every year during the summer months. After Meier's death in 2007, the amphitheater and surrounding it were put up for sale.