Ed Shieffelin was a scout for the U. S. Army headquartered at Camp Huachuca. Ed frequently searched the wilderness looking for valuable ore samples. Soldiers from the camp told him the only stone he would find was his tombstone. In the summer of 1877 Ed was working the hills east of the San Pedro River when he struck a vein of silver ore in a high plateau called Goose Flats. Schieffelin filed his claim under the name "The Tombstone."

At the town's founding in March 1879, it took its name from the original mining claim. Comprised mostly of wooden shacks and tents, it had a population of 100. By 1881 there were fancy restaurants, a bowling alley, four churches, an ice house, a school, an opera house, two banks, three newspapers, and an ice cream parlor, alongside 110 saloons, 14 gambling halls, and numerous brothels all situated among a number of dirty, hardscrabble mines. Although the town was booming it was long before there were generations of families settled, large homes built and apartments for rent. It had running water and telegraph and limited telephone service. Miners were paid $4.00 per day working six 10-hour shifts per week. By late 1881 it had more than 7,000 citizens, excluding all Chinese, Mexicans, women and children residents. The approximately 6,000 men working in Tombstone generating more than $168,000 a week (approximately $3,946,800 today) in income. When Cochise County was formed from the eastern portion of Pima County on February 1, 1881, Tombstone became the new county seat. On December 25, 1881 the Bird Cage Theater opened, and in 1882 the New York Times reported that "the Bird Cage Theatre is the wildest, wickedest night spot between Basin Street and the Barbary Coast."

The rural area was populated by Cowboys who were largely Confederate sympathizers from southern states, especially Texas, who viewed the city's business owners and lawmen who were largely from northern states as carpetbaggers. On the evening of March 15, 1881, three Cowboys attempted to rob a Kinnear & Company stagecoach carrying $26,000 in silver bullion en route from Tombstone to Benson, Arizona, the nearest railroad freight terminal. Near Drew's Station, just outside of Contention City, the popular and well-known driver Eli 'Budd' Philpot and a passenger named Peter Roerig were both shot and killed. Deputy U.S. Marshal Sheriff Virgil Earp and his temporary deputies and brothers Wyatt Earp and Morgan Earp pursued the Cowboys suspected of the murders. This set off a chain of events that came to be known as the Gunfight at the O.K. Corral. The gunfight was the result of a personal, family, and political feud. Three months later on the evening of December 28, 1881 Virgil Earp was ambushed and seriously wounded on the streets of Tombstone by hidden assailants shooting from the second story of an unfinished building. Although identified, the suspects were not prosecuted. On March 18, 1882, Morgan Earp was killed by a shot that struck his spine while playing billiards. Once again, the assailants were named but escaped arrest. Wyatt Earp, concluding that legal justice was out of reach, led a posse that pursued and killed four of the men they held responsible on what became known as the Earp Vendetta Ride.