Named for Captain Benjamin Louis Eulalie Bonneville, who experienced amazing adventures in the Rocky Mountains, California, and the Northwest as early as the year 1832. His journal, amplified by Washington Irving, was published under the title, Adventures of Captain Bonneville, U.S.A., in the Rocky Mountains and the Far West. The town marks the Washington side of Bonneville Dam and was born of an influx of workers on the project. It grew from a wild, sparsely settled community into a boom town typical of those which sprung up near construction camps. Short side streets, filled with mud during the rainy season and choked with dust during the summer, once branched sharply from either side of the highway. Temporarily constructed cabin camps once lined the highway.

The town relied entirely upon the payroll of the dam for its livelihood; the largest building was a large barn-like structure used as a dance hall. The town also had a small community church, a post office, a railroad station and several hotels, restaurants, and taverns.

In 1971, the community was again selected by federal agencies to be the site of another water resource project, a second powerhouse. This project was the first to use federal funds to plan, design and develop a new community connected with a water resource project. A site was selected west of the original town, and residents and businesses were furnished temporary housing until they could build their own permanent homes and facilities. The seven-year project was completed in 1978.