Native Americans from the Cowlitz tribe were original inhabitants of Kelso were separated into the "Taidnapam" and Mountain" tribes, who were members of the Sahaptin and Salish language families. In 1855 Kelso was founded by Peter W. Crawford, a surveyor who took a donation land claim and on it platted dated and filed in October 1884, a townsite named after town of Kelso, Scotland. Known as "little Chicago" because of the large number of taverns and brothels that catered to local loggers. The economy continues to be based largely on wood products.
On May 18, 1980, Kelso saw the eruption of Mt. St. Helens. Many areas of the city, such as Three Rivers Mall, are built on volcanic ash that was dredged from the Cowlitz River from the volcanic mudflow.
In March 1998, Aldercrest Community began to shift; eventually 129 houses were destroyed by this landslide. Investigation report provide information that community was built on top of an active landslide area, and heavy rains had set the earth into motion.