The first European settlement in the vicinity of present-day Clay City was in 1786, by Stephen Collins and his brother, after their discovery of pyrite deposits.

[3] The Collins brother sold their forge to Clark and Smith in 1805, the forerunner company of the Red River Iron Works.

By the 1880s, the post office was moved across the river and was renamed Waltersville for the local family carrying the same surname.

It is believed that the name was officially changed from Waltersville on August 13, 1883, when the post office was renamed Clay City.

[4] According to the United States Census Bureau, the city has a total area of 1.1 square miles (2.8 km2), all land.

CCPD is a fully functioning police department that manages narcotics, roadway patrol, warrant service, and other activities.

The climate in this area is characterized by hot, humid summers and generally mild to cool winters.