The discovery of rich placers at Sailor Diggings (later known as Waldo) in 1852 and the resulting gold rush brought the first settlers to this region. Several U.S. Army forts were maintained in the county and many engagements during the Rogue River Indian War (1855-1858) took place within its boundaries.

Josephine County was created by the Territorial Legislature on January 22, 1856, from the western half of Jackson County. It was the nineteenth, and last, county created before statehood.

The county seat was originally located in Sailor Diggings, but in July of 1857 was relocated to Kerbyville, situated on the main route between the port of Crescent City, California and the gold fields. In 1886, the county seat was finally relocated to Grants Pass, a new town on the railroad that was completed through Oregon that same year.

Although several tribes of Native Americans lived in the area from which Josephine County was created, most of their members had been moved to the reservation at Grand Ronde by the end of the Rogue River Indian War. Soon afterwards all Indians in southwest Oregon, with the exception of a few tiny bands, were moved to the Coast reservation (later known as the Siletz Reservation).

Josephine County was also the home to a large Chinese population. Most had come to the area to work gold claims purchased from whites no longer interested in working them. Even though they could not own land, they had to pay a tax to mine gold, and were relegated to inferior claims.