On May 6, 1859, John H. Gregory followed Clear Creek upstream looking for gold.  As he pulled a low tree branch out of the way and began to pan the creek, he discovered what was later called the "The Gregory Lode". Located in a gulch between what later became Central City and Black Hawk, he staked the first of many mining claims in the vicinity. Immediately prospectors flocked to the region and within two months, the population grew to 10,000 people seeking their fortunes. The Clear Creek Mining District was so rich with ore it became known as the "Richest Square Mile on Earth.” Gregory’s discovery is commemorated by a stone monument at the eastern end of Central City.

An article in the Daily Central City Register described the living conditions at the time as thus: "By the first of June 1859, Gregory Gulch from North Clear Creek to the confluence of Eureka, Nevada and Spring Gulches was literally crowded with human beings huddled together in tents, wagons, log cabins, dugouts, houses made of brush, and of every conceivable material that promised shelter."

Other gold deposits were found in surrounding gulches and several mining camps sprouted up, including Springfield, Bortonsburg, Missouri City, Nevada City, Dog Town, Eureka, Russell Gulch, Lake Gulch, Black Hawk Point, Chase's Gulch and Enterprise City. By the middle of July 1859, between 20,000 and 30,000 people were living in and around Gregory Gulch.

There are two popular stories about how Central City was named. The first involved William N. Byers, founder of the Rocky Mountain News, who pitched his tent squarely in the center of the mining district in June 1859. Supposedly, he suggested that a town be laid out in that vicinity and since it was about half way between Nevada City (Nevadaville) and Mountain City, it should be called "Central City." The second is of a miner's supply store, which was in the same area and was called the "Central City Store." Either way, Central City was born --- its official name: The City of Central.

The first newspaper published in the mountains was the Rocky Mountain Gold Reporter and Mountain City Herald. In its first issue, dated August 13, 1859, it contained the following article regarding Mountain City:

"Although not three months old, it contains already some 300 buildings substantially erected, with a population of between 2,800 and 3,000, nearly all of whom are miners. Yet the arts and trades are well represented, we have about 25 stores, 2 jewelry shops, 3 tailor shops, blacksmiths, shoemakers, painters, etc."