The town was named after the Alexo Coal Co., which in turn was named after the man who discovered the mine, Alex Kelso. The Post Office opened on April 1, 1923, and closed on July 30, 1955. The first postmaster was George Robertson, who held the position from 1913 until 1950.

The Alexo Coal Company established the mine and surrounding settlement. The town served miners extracting steam-quality, high-volatile "C" bituminous coal from the underground Coalspur Formation using room-and-pillar mining.

By 1948, the mine reached an annual output of roughly 33,000 tonnes of coal, bringing cumulative underground shaft length to over 800 metres. The town population was centered around a workforce of 70 (including 30 underground miners) and featured 30 family cottages, a hotel, a bunkhouse, a cookhouse, and a general store.

As North American railways replaced steam locomotives with diesel engines, the commercial market for steam coal collapsed. The Alexo mine permanently closed in 1955 after extracting a total lifetime volume of 764,600 tonnes of coal. Most of the town's structures were disassembled or removed shortly after.