Chisholm is located in the center of the Mesabi Iron Range, which is known for its vast deposit of iron ore. It was timber, not ore, though, which first attracted development of the area in which the town currently sits. Prior to 1882, the site was covered by a forest of pine trees, as well as some birch trees. The area was ultimately discovered and explored by lumber barons. Mining in the area followed shortly thereafter. In 1892, E.J. Longyear (namesake of the local lake), discovered the first mine, the Pillsbury, in present-day Chisholm. The first shipments of "Mining Headframe" iron ore took place in 1898 on the Great Northern Railroad between Chisholm and Duluth.

Around 1900, a second mine was developed by Archie Chisholm, after which the city of Chisholm was named. Following the opening of the Chisholm Mine, Archie developed the townsite of Chisholm and was subsequently incorporated as a village on July 23, 1901. By 1908, Chisholm had grown to nearly 500 buildings. On April 2, 1905, the First National Bank opened for businesss, and on, July 1, the first Duluth, Missabe and Northern railway train arrived in the city. As additional mines were discovered and the demand for ore increased, town prospered.

In the fall of 1908, a major fire struck the thriving town, nearly obliterating the city. Following the great fire of 1908, newly enacted building codes required the town be rebuilt with brick in order to protect the community from future fires. Despite the fire, the city of Chisholm thrived, growing to 10,000 residents during its prime of the 1920's.

Like other parts of the country, the mining boom waned and the city was forced to develop new industries.  Tourism stands as the major industry in the Chisholm area today, as well as the ferrous metals industry.