Located in the Mount Baker-Snoqualmie National Forest, near Deception Falls on the Skykomish River, Skykomish was founded as a railroad town. Today, it is mainly a stopping point for recreational access to the surrounding mountains, including skiing at nearby Stevens Pass.
Being located in the far northeastern corner of King County, mountains deny Skykomish any road access to the rest of the county. Instead, U.S. Highway 2 (known in the area as the Cascade Highway) connects it with Snohomish County to the north and through Stevens Pass (17 miles east of town) to Chelan County.
The name "Skykomish" derives from the Skykomish or Skai-whamish tribe (originally considered a subdivision of the Snoqualmies) who inhabited the area before European settlement. The town of Skykomish was officially incorporated on June 5, 1909.
From the 1890s to 1974, Skykomish was a maintenance and fueling station for the Great Northern Railway, which eventually became part of the Burlington Northern Railroad, presently known as BNSF Railway. It was also once the western terminus for electric operations (1909–56) on the Cascade Tunnel route all the way to Wenatchee. Here, steam or diesel locomotives were changed or coupled to electric locomotives.
Waste disposal practices, common during that era, resulted in the contamination of its soil, its groundwater, and the Skykomish River by oil and heavy metals. BNSF (then BN) and the Washington State Department of Ecology began remediation discussions in the mid-1980s, and in 2006, agreed to a plan whereby the railroad would pay up to $50 million to clean up the area over a three-year period (completed in 2009). This effort involved massive excavations—essentially removing the contaminated soil and replacing it with clean soil—and the rebuilding of a levee. Many of Skykomish's buildings—both homes and business—were moved during the cleanup process.