Founded in 1862 and named after the local Bannock Indians, it was the site of a major gold discovery in 1862, and served as the capital of Montana Territory briefly in 1864, until the capital was moved to Virginia City. Bannack continued as a mining town, though with a dwindling population. The last residents left in the 1970s.

At its peak, Bannack had a population of about ten thousand. Extremely remote, it was connected to the rest of the world only by the Montana Trail. There were three hotels, three bakeries, three blacksmith shops, two stables, two meat markets, a grocery store, a restaurant, a brewery, a billiard hall, and four saloons. Though all of the businesses were built of logs, some had decorative false fronts.