Sioux Lookout's name comes from a nearby mountain, which, in the late 1700s, was used by Ojibway Indians to watch for Sioux warriors who were expected to ambush their camp. As it happened, the Ojibway did the ambushing and killed all but one of the Sioux. There may be a different Sioux version of this story but if so, it is not told here in Ojibway country. Because of this strategic location, Sioux Lookout was a surveyors camp in the early 1900s. From Sioux Mountain, early canoe brigades using the English River System could be sighted from a great distance. Hudson Airport in Sioux Lookout was one of the busiest airports in North America during the Red Lake Gold Rush.

Present-day Sioux Lookout was incorporated in 1912 and was then a terminal point on the C.N.R. Trans-Canada line. For many years, we were a railway town. Now, the C.N.R. is a significant employer, but it is not the base of the municipality's economy. The forest industry is an important part of the economy. Its inherent instability is partly offset by the stability of the service sector. As a result, Sioux Lookout barely felt the effects of the recession of the early 1980s. Tourism makes a significant contribution to the economy, but its potential is just beginning to be tapped.

Urban Sioux Lookout fronts on Pelican Lake and the municipality undertook a lakefront improvement program to beautify this area. There are now more parks, paths, and other recreational facilities along the lakefront. Numerous other lakes are easily accessible by car or boat from Sioux Lookout including Minnitaki, Lac Seul, Abram and Pelican Lakes. Hudson fronts on Lost Lake with other lakes accessible such as Little and Big Vermilion lakes.