The land in the surrounding area was opened up for agriculture in the 1920s. A railway was built between Kondinin and Hyden Rock in 1930. The townsite was gazetted in 1932 following demand for land around the railway terminus.
The first wheat crop was harvested in Hyden in 1927. The town's economy continues to rely on agriculture but mostly in the form of cattle and sheep production that has a current value of approximately $35 million. The town also benefits from mining and tourism.