In 1874, Merrick Cheney and George Ford opened a stage-stop in Grasshopper Valley to take advantage of the traffic generated by the Hayden Hill mines. On September 16, 1875, the Madeline Post Office was established there with Ford as postmaster. Why Ford selected the name Madeline is not known. The post office closed on October 17, 1882 and in the following year Ford sold his Grasshopper holdings to William T. Summers. This location is where Slate Creek enters Grasshopper. However, an 1893 U.S.G.S. map indicates the location at the lower end of Grasshopper.
The current town of Madeline came into existence in 1902 when the Nevada-California-Oregon Railroad extended its line through the region. On October 9, 1902, the Lassen County Board of Supervisors accepted the Madeline townsite. For the next fifteen years, prosperous times were to be found at Madeline. The advent of World War I and the subsequent depression of the 1930s had a dramatic impact, not only to the town of Madeline, but to the Plains as well, as seventy percent of its population left the area.