The Park has considerable historic significance. Coastal Salish-speaking native Indians, identified as the "St tcas bc", were known to have occupied the Tumwater site at the mouth of the Deschutes River as a fishing and food gathering camp. Although probably a permanent village site, the life of the Coastal Salish Indians made it necessary for them to travel long distances, living in other areas in order to provide food for their tribe.

More than 60 years later the same site became the first permanent American settlement on the Puget Sound. Michael T. Simmons and George Bush with a group of 30 pioneers, including 18 children, settled on the river in 1845. Simmons and his party built a water-powered sawmill and a gristmill and industry began.

Clanrick Crosby purchased the sawmill and gristmill from Michael Simmons in 1849. About a decade later, around 1860, Clanrick built a home nearby the river for his nephew, Nathaniel Crosby III, and his new bride. The home is known today as the Crosby House.

In 1947 the Crosby House was acquired by Olympia Chapter #4 of the Daughters of the Pioneers of Washington, who repaired and furnished the historic home and opened it to the public. Funds to purchase the house came from a number of prominent donors, including the Schmidt brewing family, the Olympia Brewing Company and recording and film star Bing Crosby, the famous grandson of Nathaniel Crosby III. In 1981 the property was deeded to the City of Tumwater, although the Daughters of the Pioneers continue to have a key role in preserving this last important reminder of the City's pioneer past.

The area around the falls became an important manufacturing area during the 19th century when water powered grist mills and other manufacturers. By the early 20th century those users had waned.

Tumwater Falls Park lies within the Nationally Registered Tumwater Historic District, along with the Crosby House, the Schmidt House and another significant historic home, the Henderson House, which is a City of Tumwater Museum.