Founded in 1882 during the construction of the Oregon Short Line, Shoshone has long been considered the main railroad station in south central Idaho's Magic Valley region.

[5] The much larger community of Twin Falls 26 miles (42 km) to the south never developed a strong railroad presence due to the logistical issues presented by its location south of the Snake River Canyon.

The Union Pacific Railroad opened the Sun Valley resort in 1936 (and owned it until 1964), and its pre-existing spur route to Ketchum connected here.

[5][6][7] The spur first headed northeast, following today's US 93, to Richfield and Tikura, then peeled northwest to Picabo and on to Bellevue, Hailey, and Ketchum, so the distance was greater than today's more direct 55-mile (90 km) drive north on Highway 75.

The caves are lava tubes that stay cool enough for the ice inside them to remain frozen throughout the summer.

In the days before refrigeration, this feature, coupled with the railroad, made Shoshone popular with travelers as "the only place for hundreds of miles where one could get a cold beer."

Today, Shoshone still has one bar, but also boasts a cafe, a movie theater, and a grocery store—unusual for such a small town.

While limited retail jobs exist, Shoshone is primarily a farming and dairy community.

In recent years, Shoshone has become a bedroom community for workers of neighboring Blaine County, due to a significant difference in cost of living.

Much of the land around Shoshone is lava rock, which can make excavation for building problematic, and limits the amount of useful farmland.

There has been a small amount of new construction and Shoshone has experienced slow growth since the year 2000, due in part to commuters who work in Sun Valley but choose to live in Shoshone because of the comparatively lower cost of living.