Keystone was originally established as a settlement when gold was discovered in the Black Hills region during the 1800s. In 1891, William B. Franklin, Thomas G. Blair, and Jacob Reed named the community after the Keystone Mine. In 1894, Franklin discovered the Gold Bearing Holy Terror Mine, named after his wife. As the mining industry flourished, many people moved to Keystone. However, due to flooding, economic depression and after much of the resources had been extracted over the years, the mining industry declined.

Today, Keystone has transformed itself into a resort town for tourists visiting the Mt. Rushmore National Monument. After a multi-million dollar redevelopment project completed in 1998, Mt. Rushmore now offers a museum and theater complex, visitor orientation center, gift shop and dining facilities. There is also a dramatic and moving lighting ceremony that illuminates Mt. Rushmore at night.