Coal, along with clay deposits, was found on the site by John D. Huff in the late 1880s, and the Southern California Coal and Clay Company was formed to mine them.

The town site of Terra Cotta was laid out and was given a post office on October 26, 1887.

The finished product had to be shipped by wagon six miles through Lake Elsinore to the La Laguna rail station at the mouth of Railroad Canyon until 1896, when a spur line was built through Lake Elsinore and Terra Cotta to the new clay deposits in Alberhill.

Almost abandoned in 1901, Terra Cotta was revived in 1906 when the California Fireproof Construction Company built a new plant there to make ceramic pipes.

An old grid of dirt streets laid out through the sagebrush is all that remains of Terra Cotta.