Gold was discovered near Deer Lodge Montana in 1862. Subsequent discoveries in Bannack and Virginia City prompted a gold rush that attracted men and women of both good and bad character. Thievery, lawlessness, and murder prevailed until vigilante groups organized and hung or banished many of the worst criminals. In the winter of 1866-67, the Territorial Legislature requested funds for a prison.

Deer Lodge was picked for the site of the new Territorial Prison. Funding problems caused many delays and revisions in the plans, but construction finally began in the spring of 1870 and the first wing was completed by fall of the same year. The first convict was received on July 2, 1871.