Basin is located almost in the center of Big Horn County with the Big Horn River near the eastern edge of town. Off and on over the years, the Big Horn has jumped its banks and flooded the townsite of Basin. A particularly bad flood happened in June 1963 when the peak river flow hit 19,400 cubic feet per second.

This is farming country on the western side of the Big Horn Mountains. The Basin Post Office was built in 1919 and is included on the National Register of Historic Places. Basin itself is named after the Bighorn Basin, a valley that stretches from the Bighorn Mountains on the east to the Absaroka Mountains on the west. The southern boundary of the basin is the Owl Creek and Bridger Mountains. The basin drains to the north via tributaries of the Bighorn River. The Wind River flows in from the south but as soon as it clears the "Wedding of the Waters" in those southern mountains, it becomes the Bighorn River.

The area was first explored by John Colter (previously a member of the Lewis & Clark Corps of Discovery) in 1807 but didn't really come into public knowledge until Jim Bridger blazed the Bridger Trail to connect the Oregon Trail with Montana in 1864. The Bozeman Trail had previously been the main route to Montana but after Red Cloud's War, that route was closed to white settlers. That's when the Bridger Trail came into its own.

Basin was founded by Winfield S. Collins in 1896. West of Basin was the already established village of Otto, but Collins couldn't make a satisfactory agreement with Frank Woods, who owned most of Otto. So Collins bought the land and founded Basin expressly as his vehicle to become the county seat of Big Horn County. There was a lot of politicking back and forth but when the votes were counted in November 1896, Basin had won over Otto by 44 votes. There were only 33 people living in the townsite of Basin at the time, and most of them lived in dugouts. As usual in the West of those days, the promoters of the "wonders of living in Basin, in the banana belt of Wyoming" were shameless with their lies. A blizzard in January 1899 almost killed off the people living there. The thermometer dropped to -50° and stayed there for several weeks. By the time supplies were brought in from Billings, Montana, the residents were almost out of food.

Oil and gas were discovered in the barren hills east of town in 1908. By 1909, Basin had central water and sewage, a natural gas plant to provide heat and light and a municipally owned telephone system. 1910 saw the construction of a Carnegie Library, the Basin Hospital, the Markham Hotel, the Catholic Church and a brick building for the county offices and jail. There was even a 2-story brick grade school in the western part of town.

Today, Basin still shows the results of a tree and shrub planting campaign begun back in 1910. The citizens also began a lilac planting drive in 1936. The streets and highways are now lined with glorious shade trees and perfumed hedges. The streets are wide, the homes comfortable and the 4-block civic center includes a courthouse, library, post office and park.