Magrath was established in 1899 by settlers sent by The Church of Jesus Christ of Latter-day Saints from Utah and Idaho. These Mormon settlers were recruited by the Alberta Railway and Irrigation Company to construct irrigation works in the areas. The settlers were paid cash and land in the town. The town was named after Charles Alexander Magrath, the son-in-law of Sir Alexander Galt.
The Post Office opened on March 1, 1900.