It was used by some prospectors during the Klondike Gold Rush of 1898-1899; other mining kept the lower Dalton Trail active through the years following its establishment.

The highway was built by the U.S. Army in 1943 as an alternate route from the Pacific Ocean to the Alaska Highway, in case the White Pass and Yukon Route railway from Skagway should be blocked.

In the first decades after the war, maintenance was spotty at best; the road was plagued with blizzards in winter and mudslides in summer, and for a time in the 1960s and 1970s, all vehicles traveling the highway were monitored on radio.

Complaints over the condition of the road, primarily in Alaska, led to the U.S. Congress-funded Shakwak reconstruction project.

This project, covering the Haines Highway and the portion of the Alaska Highway from Haines Junction to the U.S. border, began in 1976 and was mostly complete by the 1980s, but is still continuing, providing grade improvements, rerouting of dangerous sections, and paving.