The community was originally established under the name Bridgend. Driven by the expansion of the region's coal reserves, the area attracted a diverse immigrant workforce eager to work the deep shaft mines developed by North American Collieries.

As the population swelled around the local mine, the settlement officially incorporated as the Village of Coalhurst on December 17, 1913, reflecting its deep economic reliance on the coal industry. The Post Office opened September 1, 1912.

Though prairie mines were historically considered less volatile than mountain mines, Coalhurst was struck by tragedy on December 9, 1935. A sudden underground methane gas explosion ripped through the North American Collieries mine during a shift change, killing 16 miners. The tragedy devastated the small town. A massive joint funeral procession was held in nearby Lethbridge, drawing thousands of mourners to honor the fallen workers. Shortly after the disaster, the local mine closed as operations shifted to the newer Galt No. 8 mine. With its primary employer gone, Coalhurst suffered a severe economic downturn.