The village of Federal Dam began as a railroad town.  It was the terminal or division point for the trains going from Superior, Wisconsin to Federal Dam and from Thief River Falls to Federal Dam.  The line was completed on September 24, 1910.  Despite heavy snow the night before, the first train went through on November 14, 1910. 

With the building of the Soo Line and the choice of Federal Dam as a division point, the village grew rapidly.   The village was incorporated on October 30, 1911, and separated from Gould township on April 23, 1912. 

The Corps of Engineers issued its first license for a public boat landing at Leech Lake in 1913.  In 1935, the Federal Dam Improvement Club leased land for a campground for tourists.  For many years, the village was in the business of leasing land to launch services for docks.  Brochures were distributed far and wide.  Trains came out from Chicago on the Soo Line for fishing excursions. 

Public use continued to expand, and by the 1950’s, recreational facilities at Federal Dam were booming.  In 1955, Federal Dam gained national attention for the Leech Lake Muskie Rampage.  The muskies started hitting on a hot weekend in July and the phenomenal catch lasted about two weeks.