Dunlay was established in Medina County in 1881 to serve the Galveston, Harrisburg, and San Antonio Railroad. Originally named Enterprise, it was renamed in 1895 for railroad conductor Jerry Dunlay. The town's main purpose was to house railroad section crews responsible for a ten-mile stretch of track between Dunlay and Hondo. In its heyday, Dunlay had a cotton gin, general store, lumber yard, Harvey restaurant, depot, grist mill, blacksmith shop, butcher shop, saloon, boarding house, school, and Hermann Sons Hall. During construction of Medina Lake Dam in 1911-1912, a spur line from Dunlay reached the dam site and carried supplies and materials there. As railroad maintenance became mechanized, section foremen supervised longer stretches of track, crews were transferred, and Dunlay began to decline. After the railroad left, many buildings and the Medina Lake spur were dismantled and taken elsewhere, and many businesses left with the railroad. The general store, filling station, and post office continued, and Dunlay remains home to many families and new businesses today.