In 1873, American businessmen Thomas Carney and William Fairbanks, following advice from railroad entrepreneur James J. Hill, received a grant from the Province of Manitoba for 640 acres along the east side of the Red River near the Canada–United States border. Hill had advised Carney and Fairbanks that the area had significant potential to become a railway hub for the region. The existing settlement of West Lynne on the west side of the river had already established itself as a key point along the trading routes between Winnipeg and St. Paul, Minnesota. With the emergence of railroads during this time, the addition of their own railway would bring great economic prosperity.
In 1874, the two men led a group of 100 who formed the new settlement of Emerson, which was named after writer and poet Ralph Waldo Emerson. With the promise that Emerson could be the new "gateway to the west", the settlement grew quickly and, by 1876, a church and a school were built.
Manitoba's first railway, the Emerson Line, which ran along the east side of the Red River from St. Boniface to Emerson was completed in 1878. Soon after, the railway from St. Paul to St. Vincent, Minnesota was completed and the two lines were connected. The arrival of the railway to Emerson brought prosperity, and instantly elevated Emerson's status as one of Manitoba's most important settlements.
Emerson was originally incorporated as a town in 1879. Over the next four years, the community experienced a boom. Its population swelled to over 10,000 and in 1883, the community absorbed the neighbouring community of West Lynne. A court house, town hall, and other large, elaborate structures were erected as businesses thrived, thanks to immigrants and travelers from the east stopping in Emerson before embarking west. To help cement its status as "gateway to the west", the town negotiated with Canadian Pacific Railway to build a new railway west from Emerson. However, shortly after work on the line began, CPR reconsidered and the railway was never built.
Coupled with the completion of CPR's transcontinental railway through Winnipeg, the loss of the western railway ended the prospects of Emerson being the "gateway to the west", a title that would be bestowed upon Winnipeg. Businesses relocated to Winnipeg and travelers who would previously would have come to Manitoba through Emerson were now taking the new all-Canadian CPR route to Winnipeg and then west. By 1884, only ten years after the settlement was founded, the community was bankrupt. It would take the community years to recover. A fire destroyed the original town hall in 1917. A new town hall was built to replace it, with help from the Manitoba government. Many of the abandoned buildings were eventually destroyed by Red River floods, while others were removed to make way for the dike that was constructed around the community.