Drawn by abundant water from a natural lake, settlers began moving into this area in the late 1840s, and ranching became the earliest commerce, with cattle, sheep, and racing horses raised for sale in the southern states. Cattlemen brought their herds to the lake area before transfer to Belmont, 20 miles north, where a branch of the Chisholm cattle trail was located. George W. Colley, regarded as the founder of the Smiley Lake community, moved here in 1879 and built a steam-powered cotton gin and sawmill near his home. He was later joined by Major W.M. Phillips, who opened a mercantile establishment in 1883. The settlement of Smiley Lake, named for early pioneer Jim Smiley, stood on the Cuero-Rancho trade route between San Antonio and the Gulf port of Indianola. The village at one time included a saddle factory, blacksmith shop, wire fence plant, newspaper, general stores, drugstore, school, Baptist church, an I.O.O.F. Lodge, and a post office established in 1884. When the Galveston, Harrisburg and San Antonio Railroad completed lines nearby in 1906, the town of Smiley was moved to its present location, one mile north.