A collection of small homes and fruit warehouses along the river and the railroad tracks, and a junction point of rivers, railroads, and highways. It was named for Andoniram Judson Underwood, a veteran of the Yakima Indian wars, who settled in the region in 1875 and platted the town site in the fall of 1881.

The town as of 1941 consisted of a railroad station, a few houses along the banks of the Columbia, a service station, and a large three-story hotel. There is no longer a station for the railroad, and the fruit warehouses were moved upriver to White Salmon. There are still a few homes along the river, but most of the residential population has moved up the hill to Underwood Heights. The large three-story hotel has been turned into apartments and is significantly altered.

The White Salmon River, joining the Columbia at Underwood after a tumultuous career in a narrow, rocky canyon, is so named because salmon swimming up the stream to spawn change from a deep red color to a pinkish white.