Silver Dollar City is located at the site of one of the Ozarks' oldest attractions, Marvel Cave. Henry T. Blow, a lead mining magnate, explored the cave in 1869 with six miners. They found no lead, but were convinced that the flat ceiling of one room was composed of marble, and so they originally named the cave Marble Cave.

The cave remained undisturbed until 1882 when a group led by T. Hodges Jones and Truman S. Powell entered the cave in hopes of finding lead. Jones and Powell instead found huge amounts of guano and a flat wall which they also believed to be marble. Two years later Jones bought the property and formed the Marble Cave Mining and Manufacturing Company. The company planned a town, Marble City, on the rough hilltop near the cave and in 1884 recorded a plat map at the courthouse in Galena, Missouri. By 1889 much of the guano had been mined from the cave, the marble wall proved to be limestone, and no lead ore was found. The mining company ceased operation.

In 1889, William Henry Lynch, a Canadian miner and dairyman, purchased the cave and a square mile of the surface around the entrance for $10,000 (equivalent to $350,000 in 2024). Lynch, with the aid of his family, proposed to open the cave to sightseers. The Lynches began operation of the sightseeing venture on October 18, 1894. The venture was not immediately profitable and was closed until Lynch raised additional capital to reopen the cave sometime after 1900. The cave has remained open since, making it one of the oldest continuously running tourist attractions in the Ozarks.

When William Lynch died in 1927, ownership of the cave passed to his daughters and the name of the cave was changed to Marvel Cave. The Lynch family operated the cave for nearly fifty years until a Chicago vacuum cleaner salesman, Hugo Herschend, purchased a 99-year lease on the cave in April 1950.

After Hugo's death in 1955, his wife, Mary, took over the day-to-day operations of the venture. With the aid of her two sons, Jack and Peter, she was able to make vast improvements to the cave, including building a narrow-gauge funicular railway whose trains pulled visitors a distance of 218 feet (66 m) from the depths of the cave to the surface.

Once the railway was in operation, the Herschends felt that development of the cave was complete. Therefore, they decided to create another attraction which would bring even more tourists to the cave.

Mary, Jack, and Peter began building an 1880s-style Ozark village on the surface surrounding the site of the cave. Mary wanted authenticity as well as preservation of the area's natural beauty. The themed frontier town was named Silver Dollar City and originally was the site of five shops, a church, a log cabin, and a street production reproducing the feud between the Hatfields and McCoys several times daily.

The name Silver Dollar City was inspired by Ozark Jubilee script writer and publicist Don Richardson after the promotional idea of giving visitors silver dollars in change. The scenic designer for much of the original attraction was Andy Miller, who had been the set designer for the Jubilee in nearby Springfield. Opening day, May 1, 1960, included an appearance by Uncle Cyp and Aunt Sap Brasfield. In its first year, Silver Dollar City drew more than 125,000 people, four times more visitors than had annually toured Marvel Cave. "We discovered we were in the theme park business," Pete Herschend said. In 1968, the park started charging admission.

In 1972 Genevieve Lynch, the last of William Lynch's daughters, died and bequeathed the land under Silver Dollar City and Marvel Cave to the College of the Ozarks and Branson Presbyterian Church. The Herschends continue to operate it.

In 1976, the Herschends purchased the Goldrush Junction theme park in Pigeon Forge, Tennessee, which they renamed Silver Dollar City Tennessee. In 1986, the Herschends partnered with Dolly Parton and renamed the park Dollywood.

Silver Dollar City expanded its entertainment over the years by adding attractions such as a stage coach ride, a narrow-gauge steam railroad, interactive activities, and various thrill rides. The park is also home to resident craftsmen who can be seen practicing their craft and exhibiting and selling their work to park visitors.

In October 2024, Silver Dollar City announced a 10-year plan to expand into the surrounding area, starting with a resort hotel expected to be completed in late 2026.

The Clampett family of CBS-TV's The Beverly Hillbillies decided to pay a visit to Silver Dollar City (treated as an actual town, rather than a theme park) to start off the 1969–1970 season. The plotline involved Granny (Irene Ryan) attempting to find a husband for Elly May (Donna Douglas) back in the hills, while Jed (Buddy Ebsen) socialized with hotel clerk Shorty Kellems (Shug Fisher). They visited the blacksmith Shad Heller, soapmaker Granny Ethel Huffman, and woodcarver Peter Engler, and Miss Hathaway (Nancy Kulp) was seen in the Ozark woods. The Hillbillies were from the area surrounding Silver Dollar City and Branson, and references to Jim Owens and his White River float trip business and some Missouri mountain locations were made throughout the show's nine-year run. Five episodes of The Beverly Hillbillies were eventually shot in the park.

The park was featured in the 1992 book The Man Who Loved Clowns.

In 1999, Silver Dollar City was the site for the 14th annual Stihl Timbersports Series Championships. Jason Wynyard became the champion for the third consecutive year.

On December 5, 2007, ABC's Good Morning America spotlighted the park's Christmas festival, “An Old Time Christmas,” and declared it as one of the top five holiday events in the country. The park was featured as part of the show's segment called “Good Morning America Lights Up the Holidays.”