Basalt was originally part of the Ute Indian Reservation and Hunting Grounds. This vast land area was created in 1868 by an act of Congress and signed by President Grant and extended as far up the valley as Aspen and as far down the valley as Glenwood Springs and up north to Meeker.

Basalt is the result of a merging of two communities: Frying Pan Junction and Aspen Junction. Frying Pan Junction was established in 1882 and then the tent town of Aspen Junction came along around 1885.

The name Frying Pan has several stories of how it got its name. One of the stories is that the trout were so plentiful that they pretty much jumped from the river right into your frying pan. Another story says that some prospectors had hung a frying pan up in a tree where they made their camp. This was after they had moved camp twice to get away from the Ute Indians as these Utes kept camping where the prospectors were panning. They had moved once again to get away from the Indians by going over a mountain side only to find another Indian camp on the other side. At this sight one of the prospectors exclaimed “We have gone out of the Frying Pan and into the fire”. Frying Pan Junction was mainly a tent village, although a few cabins were built. There was a tent store and several tent saloons. Though squatters came as early as 1882, the first settlement town, Frying Pan, was built primarily to house and entertain the men working in the nearby charcoal ovens.

When people heard that a railroad was coming to Frying Pan Junction they quickly moved to the other side of the river to become part of what would be known as Aspen Junction. The Colorado Midland Railroad came to Basalt in 1887. Aspen Junction was a railroad camp with a boarding house, a store, a restaurant, and fifteen saloons. According to a letter written by Emma Davis Slehi, of Emma, the saloons dwindled down to three because there were not enough customers. The arrival of the railroad into Aspen Junction also helped make the charcoal easier to transport. Prior to the railroad the charcoal was loaded onto the backs of mules and horses to be hauled up to Aspen. The post office at Aspen Junction was established February 13, 1890, but the name did not change to Basalt until June 19, 1895. This was done to avoid confusion with the mail in Grand Junction.

Frying Pan Junction and Aspen Junction merged and the Town of Basalt was officially incorporated on October 8, 1901. The name was taken from the basaltic rock formation of Black Mountain (now known as Basalt Mountain) located to the north of the town.