The mid-1960s era concrete arch dam serves to regulate the flow of the Bighorn for irrigation purposes and to generate hydroelectric power.

There were deep divisions within the Crow Tribe on support and opposition for the dam construction itself as well as on leasing or sale of the land to the government.

Eventually, the land was sold to Reclamation, although much of the reservoir, which extends 72 miles (116 km) upstream into Wyoming, lies in the reservation.

Regulation of the Bighorn provided by the Yellowtail Dam has transformed the lower river into one of Montana's premier trout streams.

However, there has been significant controversy surrounding the allocation of water in the reservoir between Montana and Wyoming, and the ecological damage wrought on 184 miles (296 km) of river both above and below the dam.

In 1905, the federal government conducted the first feasibility studies for a dam on a stretch of the Bighorn within the Crow Indian Reservation, some 45 miles (72 km) southeast of Billings, Montana.

[1] Construction of the Yellowtail Dam was authorized by the Flood Control Act on December 22, 1944 as part of the Pick-Sloan Plan, a water management scheme covering the entire upper Missouri River Basin in the north-central United States.

[5][6] Boise, Idaho based Morrison-Knudsen, at the time the largest heavy contractor in the world, landed the contract to build the dam.

[4] The first concrete pour was on March 16, 1963, and the diversion tunnel was closed in November 1965, allowing the river to begin filling Bighorn Lake.

[8][13] To pass flood waters the Yellowtail Dam is equipped with a tunnel spillway on the left side, capable of handling 92,000 cubic feet per second (2,600 m3/s).

[4][16] However, the dam has significantly changed the native riverine habitat downstream as well – cutting off the supply of sediments, which once created islands and sandbars in the Bighorn's winding lower course.

In an attempt to reduce tensions between the two states Reclamation has agreed to keep the lake at a higher level while maintaining at least 1,500 cubic feet per second (42 m3/s) of flow below the dam.