The colony was started by Edward Rowan, director of the Little Gallery in Cedar Rapids, Iowa, Adrian Dornbush, former director of the Flint Institute of Art and a Little Gallery art instructor, and famous local artist Grant Wood.

His commitment to the project led the Carnegie Foundation to invest $1000 in the colony's creation.

[1] The Stone City Art Colony was meant as an alternative to more established artist colonies in Woodstock and Santa Fe, allowing artists located in the Midwest to have an easily accessible site for residency.

Wood later employed many of the artists at the colony in the Public Works of Art Project (later named Civil Works Administration) which he administered for the state of Iowa, producing a large number of Depression Era murals (thanks to the New Deal) that still decorate many post offices and public buildings in Iowa.

Even though Wood and the other faculty taught there free of charge, the colony had never become financially self-sustaining.