In 1883, when the Canadian Pacific Railway (CPR) reached Medicine Hat and crossed the river, a town site was established using the name from the Indian legends. As the west developed, Medicine Hat became instrumental with the development of the first hospital past Winnipeg in 1889 and as a CPR divisional point. It was incorporated as a town in 1898, and as a city in 1906. Medicine Hat is halfway between Winnipeg and Vancouver.

Rich in natural resources including natural gas, coal, clay, and farmland, the town was known in the early days as "the Pittsburgh of the West". A number of large industries located here, under the inducement of cheap and plentiful energy resources.  The agricultural potential of the surrounding area also made the town a viable service centre with a well established transportation route.

An economic boom occured from 1909–1914 bringing the population to over 10,000. The town hosted one of the largest Second World War P.O.W. camps in Canada. It was not until the 1950s that the town again experienced significant commercial development. Today, Medicine Hat prides itself as one of the most economical places to live in Canada, with its unique city-owned gas utility and power generation plant being predominant factors. Major industries have included chemical plants, a Goodyear tire and rubber plant, greenhouses, numerous oil and gas related companies, a foundry, and I-XL Industries (a brickworks dating from the 1880s).