Ironwood was settled in the spring of 1885. The town was incorporated as a village in 1887 and as a city on April 8, 1889. The township area north of the city was incorporated as Ironwood Township on April 8, 1889. In 1890 the population of Ironwood passed 7,500 and in 1900 it reached 10,000. Ironwood reputedly acquired its name when Frederic W. Rhinelander, president of the Milwaukee Lake Shore and Western Railroad line, arriving by train at what was then little more than a wilderness camp, chose it to honor one of his employees, mining captain James (Iron) Wood. "Ironwood" is also a colloquial name for Ostrya virginiana, a common hardwood tree in the Upper Midwest.
Ironwood is located within the now inactive Gogebic Iron Range. Iron ore was found in the area in the 1870s. The arrival of the railroad in the mid-1880s gave an impetus to more extensive development of the area's ore deposits. Several mines, such as the Norrie, Aurora, Ashland, Newport, and Pabst, were opened in Ironwood. The mines and the lumber works attracted newcomers from other parts of the US and from European countries such as England, Finland, Germany, Italy, Poland, and Sweden.
On September 17, 1887, a disastrous fire swept over half the business area, although the buildings that were lost were quickly rebuilt. In 1926, the Pabst Mine Disaster occurred, killing three electricians and trapping forty-three miners for up to five days.
By the early 1890s, twelve churches had been established in Ironwood by the various immigrant communities: