In 1840, amid the predominately agrarian southern economy, coal was discovered in what was to become Tracy City. In 1852, the Mountain Goat Railroad was constructed to transport the mine's coal and lead to the establishment of Tracy City in 1858. A new process to convert Sewanee Seam coal into coke enabled iron smelting blast furnaces. With the end of the Civil War, Tracy City coal fueled budding Southern industrialization, transforming the old agricultural economy and giving birth to the New South.

The Tennessee Coal and Railroad Company, based in Tracy City, became the Tennessee Consolidated Coal and Iron Company (TCI), controlling 60% of the coal and iron reserves in Tennessee and Alabama. Officers of TCI built stately homes and funded two "building and loan associations" which gave miners financing to build houses. The National Register of Historic Places contains several buildings and locations within Tracy City. The remains of TCI's of coke furnaces are still visible throughout the area.

The mining industry, along with logging, gave life to Tracy City throughout the latter part of the 19th century and much of the 20th. Businesses were started, schools were built, and many came to find themselves here, allowing Tracy City to become one of the largest towns in the region. However, by the 1980s most mining operations had virtually ended, resulting in the railroad tracks to be taken up in 1985. 

With the establishment of South Cumberland State Park in 1978, a new opportunity was presented to both Tracy City and Grundy County. As a result, Tracy City has become not only a hub of history, but one of natural beauty and outdoor adventure.