Prior to the mid 1800's, the Kootenay Indians are thought to have used the Vermilion Pass (BC/Alberta border) and river valley as a route for visiting and for trading their prized Vermilion coloured paint. This paint was discovered at the ochre beds (Paint Pots) only 15 km north of the Lodge.

Dr. James Hector explored the area in 1858 in search of a route through the Rockies. He recommended the Canadian Pacific Railway (CPR) lay their tracks over the gradual Vermilion Pass. However, for reasons unknown but likely political, the much steeper and dangerous Kicking Horse Pass (discovered by Hector) was chosen.

A CPR engineer, Robert Bruce, proposed around 1912 to build an all weather road from Calgary, through Banff and over Vermilion Pass to Windermere, BC. A deal was eventually struck such that the Dominion (Federal), Alberta and B.C. governments would share the cost of building the road. The Calgary to Vermilion Pass section was completed as planned by 1914. However, B.C. experiencing economic problems (partly due to the outbreak of World War I) was unable to finish their section. Not discouraged, Mr. Bruce suggested that the Dominion agree to complete the remaining 60 mile stretch of road in return for B.C. conveying 5 miles on either side to the Dominion as a National Park. Thus, on April 21, 1920, Kootenay National Park was born.

The final section was completed under-budget and ahead of schedule by the fall of 1922. Officially opened June 30, 1923, the "Banff-Windermere Highway" became the first motor road to traverse the Central Rockies and thus, the continental divide in Canada. In addition, it was the last link in the "Great Circle Tour", a road some 5000 miles long, embracing 16 National Parks in the U.S. and Canada.

Kootenay Park Lodge (then known as Vermilion River Camp) was opened by the CPR in 1923. It was one of the many wilderness lodges owned by the CPR at the time and has been used since then to attract tourists from all over the world to the beautiful Canadian Rockies. The cabins were added in the 1930's. During its over 79 year history, this property has had only 5 owners, the CPR; Vic and Marion Lord; David and Eugene Nudd; Wes and Kay Richmond; and its present owners Paul and Francis Holscher.

The present owners purchased the Vermilion Crossing Bungalows in 1991 and changed the name to Kootenay Park Lodge in 1992. Construction on the new Visitor Centre was started in October 1996 and completed to open in time for the season in May 1997. Two new cabins were added in 2010 and the Master Plan, pending Parks Canada approval, includes adding more cabins and upgrading the existing Historic Lodge and staff accommodation while maintaining the property’s charm and intimacy.