The first settlers arrived in Escalante in the spring of 1876. They were Mormon pioneers seeking a mild climate, and were ultimately successful at growing fruits, vegetables, black walnuts, and even mulberry for silk worms.

The settlers constructed and divided the town, surveying and staking off 36 five-acre blocks separated by wide streets. Following the "Zion plat" plan, the blocks were sectioned into four 1-¼ acre lots. Each block and lot was numbered. These numbers were then written on pieces of paper and placed in a hat, from which each family drew a number providing an inheritance. Every lot had space for a house, a barn, and a garden, and was enclosed with a fence. Each family also received a twenty-acre plot to farm outside of town. For protection from the elements, log houses were built because timber was plentiful. When Utah applied for statehood, all settlers paid for the lands they had received. On July 4, 1876, because no American flag was available, the small group of pioneers enthusiastically raised a striped Navajo blanket.

They named the town for Fray Silvestre Velez de Escalante, a Spanish priest who accompanied Fray Francisco Atanasia Dominguez, who had passed through southwestern Utah in 1776 searching for a passable trail to Los Angeles, California.

The economy around the turn of the century was based on farming and livestock. As finances improved, the settlers built three kilns, and fired bricks for the construction of new homes.

Initially, water was transported to individual homes by barrels placed on a wooden sled called a lizard. It wasn't until 1937 that families had culinary water piped into their homes. In 1908, telephone lines were strung from Teasdale to Escalante, down Pine Creek. This was a Forest Service project intended to help locals report fires. In 1910 the lines went to Boulder along the "Mail Trail" and later up Main Canyon and on to Panguitch. Leander Shurtz, a young blind boy, manned the switchboard until 1945, recognizing each of the 1,200 voices. In 1922, with the help of generators, lamps were mounted down Main Street, and power was furnished in the evenings.