The town is named after the Sun Dance ceremony practiced by several American Indian tribes.

The Sundance Kid was arrested for a theft he committed here in 1887, the only time he was ever incarcerated, and he took the town's name as a nickname.

[10] The town is directly south of the Bear Lodge Mountains, part of the Black Hills National Forest.

Public education in the town of Sundance is provided by Crook County School District #1.

[13] Devils Tower National Monument, a 1,267-foot (386 m) high igneous rock intrusion or laccolith in the Bear Lodge Mountains, is a short drive north of Sundance via US-14 and Wyoming Highway 585.

It rises dramatically above the surrounding terrain, with its summit 5,114 feet (1,559 m) above sea level.

[15] After his release from the town jail in 1888, Harry Longabaugh, an outlaw and member of Butch Cassidy's Wild Bunch in the American Old West, acquired the moniker "the Sundance Kid".

His nickname entered the popular culture with release of the 1969 movie Butch Cassidy and the Sundance Kid, which won several Academy Awards, including Best Original Screenplay.

Sundance, Wyoming, is also the primary setting for Lorelei James' novels in her "Rough Riders" series of 16 books involving the fictional McKay family, eking out a living as multigenerational ranchers and the younger generation's accepting who they are individually, the ins and outs of working with family every day, and finding love.