Homesteaders first arrived in the region around 1905–1906. The original post office established for the pioneer community was named Horseguards, derived from nearby Horseguards Creek.

When the rail line was constructed through the area in 1914, the settlement was officially renamed Alhambra. The name was chosen after the famous Alhambra palace complex in Granada, Spain. The Post Office opened November 15, 1913.

The Post Office opened November 15, 1913. Over the decades, Alhambra developed as a small rural service center supporting surrounding agriculture and forestry activities in west-central Alberta. Today, it remains a quiet residential hamlet within Clearwater County.