In 1884 miners began mining copper in the foothills of Mackay Peak creating the town of Cliff City at the Base of White Knob Peak. The first smelter (50 ton capacity) was at Cliff City. The Town of Cliff City was settled in 1885. The White Knob Mining Company gained control of the major mining properties in the area in the late 1890s. Wayne Darlington, the mining engineer and Superintendent, became President and General Manager of White Knob Mining Company. Darlington had obtained funding from financier John William Mackay to build a large 600 ton capacity smelter on the Big Lost River.
Mackay had the Oregon Short line Railroad build a spur from Blackfoot, Idaho which would end in an area not far from the smelter. Darlington planned and platted a town along the west edge of the railroad terminus. Showing loyalty to his benefactor, Darlington named the town Mackay in his honor. In August of 1901, the town was dedicated and, after gaining the signatures of 250 residents, petitioning for incorporation. County authorities appointed a Village Board with Darlington as the Chairman of the Board (Mayor).
On October 14, 1901, the community was incorporated and Mackay officially became a town. A note in the November 12, 1901 edition of the Silver Messenger which was the predecessor to the Challis Messenger in the Who Did What section mentions "John W. Mackay with his private [railroad] car was at Mackay last week." John William Mackay passed away on July 20, 1902 (age 70), in London, United Kingdom; and is buried in New York City . By 1904, the town of Mackay boasted a brick schoolhouse, two major hotels, one bank, an opera house, two churches, number of lodging houses, and dozens of company-owned homes (many still in uses today). The total population of the Mackay Precinct was 1,482 in 1930.