Historically, the settlement of Ephrata is quite recent. There was no known settlement until 1886, just three years before Washington attained statehood. The horse rancher, Frank Beezley, was the first to settle near the natural springs, thus the area was known as Beezley Springs. As the climate and topography were not promising to settlement, the entire region remained sparsely populated until several federal congressional actions, including the Northern Pacific Land Grant Act, the Homestead Act and Desert Claims Act, encouraged the settlement of this semi-arid desert. Originally, Douglas County spread over the entire territory of the Big Bend of the Columbia River. In 1906 the Washington State legislature divided the county and created Grant County, designating Ephrata as the county seat.

It is generally believed that the city was named Ephrata by a man who worked for the Great Northern Railroad. The name Ephrata is derived from a biblical description of an orchard in the middle of the desert. It is also the ancient name for the town of Bethlehem.

The region was known at the turn of the century for the great herds of wild horses that roamed the land. Horse trading was an important element of the local economy, and Ephrata served as the staging area for the horse round-ups. The last "Grand Horse Round-up" was held in Ephrata in 1906. Ephrata then developed as a trade and service center for cattle and sheep ranches in the area until the construction of the Columbia Basin Reclamation Project.