Impounding the 40,000-acre (16,000 ha) Lake Martin, the dam was built in the 1920s to provide flood control, hydroelectric power generation and water supply.

Actual work on the dam commenced in 1923 and was completed in 1926; the lake filled to capacity for the first time on April 23, 1928 after heavy upstream flooding.

[6] Filling the reservoir submerged the towns of Sousanna and Benson (also known as Kowaliga), as well as many historic Native American sites.

The lake is drawn down by an average of 10 feet (3.0 m) each winter to facilitate flood control operations at Martin Dam.

[2] Martin Dam's powerhouse contained three Francis turbines upon its original construction in 1927, with capacities of 45.8, 41 and 40.5 megawatts (MW).