Banff was first settled in the 1880's, after the transcontinental railway was built through the Bow Valley. In 1883, three Canadian Pacific Railway workers stumbled upon a series of natural hot springs on the side of Sulphur Mountain. In 1885, Canada established a federal reserve of 26 km² around the hot springs, and began promoting the area as an international resort and spa as a way to support the new railway. In 1887, the reserve area was increased to 673 km² and named "Rocky Mountain Park." This was the beginning of Canada's National Park system.
The area was named Banff in 1884 by Lord Steven, a former Canadian Pacific Railway director, recalling the name of his birthplace, Banffshire in Scotland. Canadian Pacific built a series of grand hotels along the rail line and advertised the Banff Springs Hotel as an international tourist resort.
Banff townsite developed near the railway station as a service centre for tourists visiting the park. It was administered by the Government of Canada's national parks system until 1990, when the Town of Banff became the first and only incorporated municipality within a Canadian national park.
In 1985, the United Nations declared Banff National Park, as one of the Canadian Rocky Mountain Parks, a World Heritage Site. Banff remains one of the most popular tourist destinations in Canada