In 1864 prospectors found large quantities of gold in the gravels where Stud Horse Creek emptied into the Kootenay River. Their discovery led to a gold rush to what was soon to be re-named Wild Horse Creek. Many miners headed north from the United States, prompting Governor James Douglas to contract with Edgar Dewdney to continue his trail which had already been completed from Hope to Rock Creek further east. The result was the Dewdney Trail from Hope to Wild Horse Creek, entirely through British territory.

Irish-born John Galbraith arrived at Wild Horse during the early days of the excitement and established a general store and a cable ferry across the Kootenay River at a strategic location where the St. Mary's River flows in from the west and Wild Horse Creek flows in from the east. He also operated a pack train bringing in supplies from south of the US border. The mining community of Wild Horse was up the creek about 7 miles from Galbraith's Ferry. By 1866 the rush was over and most miners left the region, but about 500 Chinese remained to scour the gravels for any gold that the others had left behind. By 1902 most of the Chinese had also gone.

The Kootenay First Nation, led by Chief Isadore, were unhappy with their allocation of reserves in the East Kooteanys and on many occasions brought this to the attention of government officials. He believed his people were entitled to all the land from the US border north to the Big Bend of the Columbia River and from the Rocky Mountains on the east to Kootenay Lake on the west. In 1884 two American prospectors were killed near Brisco and a Kootenay man, Kapla, was a suspect. He was arrested by a provincial policeman and locked up in the jail  at Wild Horse. Chief Isadore believed that discipline of one of his people was his own prerogative and went to the jail with 25 of his men and set Kapla free. Colonel James Baker who owned land where Cranbrook is today requested assistance from the North West Mounted Police (NWMP) to stop what he considered native depradations.

In 1887 NWMP troops did arrive under the command of Major Sam Steele and established a post (originally called Kootenay Post) on a bench of land east of Galbraith's Ferry, overlooking the Kootenay River. This site is now south of Highway 97 that runs past Fort Steele. Steele reviewed the case against Kapla and dismissed it due to lack of evidence. He also compensated the Kootenay for some of the land around Cranbrook that had been taken away from them. By 1888 the tensions in the area had lessened and the NWMP were sent back to Fort McLeoad (now in Alberta). In recognition of Sam Steele's work in the area Galbraith's Ferry as named Fort Steele.

Fort Steele prospered briefly after the North Star Mine opened in 1892 at what is now Kimberley. Ore brought down from the mine by wagon was loaded onto river boats that took it south along the Kootenay River in the US. Many buildings were built on the west and east banks of the Kootenay River at this time. However, in 1898 the town began a quick decline when the CPR decided to build its line through Cranbrook instead of Fort Steele. In 1961 the townsite was still inhabited but was almost a ghost town. In that year the BC government began purchasing land and relocating, restoring and reconstructing buildings to create a popular heritage tourism destination. Today Fort Steele tells the story of the Kootenay First Nations, the Wild Horse Creek Gold Rush, Galbraith's Ferry, Sam Steele and the NWMP and the 1890s boom period.