Before the California Gold Rush, only Native Americans had ventured into the area, which lies northwest of Lake Tahoe on the western slope of the Sierra Nevada, and which lay between areas inhabited by Maidu, Nisenan, and Washo peoples (Pre-Contact Tribal Map).

Numerous hard-rock gold mines were developed on both sides of the North Yuba River Canyon near Sierra City.

On February 10, 1963, Alec M. Ostrom of Sierra City discovered a nugget weighing 8 troy ounces while placer mining (Sinnott.)

Historic buildings that remain in Sierra City, all on the town's main street, which is Highway 49, include the two-story brick Busch Building, which the Wells Fargo Company occupied in the 19th century, the Masonic Lodge #164, and the Old Sierra City Hotel, built in 1886 by John G. Rose, which was known as the Capitol Hotel and housed local miners and offered meals and lodging for 25 cents each.

The former Sierra City School, built as a one-room schoolhouse in 1883, was listed on the National Register of Historic Places in January 2024.

The town hall, a log structure, was built after World War II, and a new post office, dedicated in 1969, features stone work in which antique mining implements, including an ore-car, are embedded.

In the summer months, fishing in the North Yuba and its tributaries and in nearby alpine lakes is popular, as is mountain-biking, placer-mining, and hiking.

According to the United States Census Bureau, the CDP covers an area of 2.2 square miles (5.6 km2), 99.99% of it land and 0.01% of it water.

Summers are hot and dry, while winters are mild, wet and very snowy, with annual snowfall averaging 107 inches (272 cm).

[11] Federally, Sierra City is in California's 1st congressional district, represented by Republican Doug LaMalfa.