This city, originally known as Old Town, grew from a small settlement in 1848 to a developing steamboat and trading post community in the following years. In 1878 a post office was conceded to the town, however, the name given to the post office was Sunk Lands, as a post office named Old Town already existed. The residents continued to use both names for the city and post office until the 1880s; during this decade first the city and then the post office changed their names to Lake City, for a lake located nearby. The city was incorporated in 1889.
