The original Lake County Courthouse was built in 1884

The arrival of William Lee and Charles Walker to Dakota Territory in 1870 led to the establishment of the town of Madison on the southwest side of Lake Madison. Both the lake and the town were named after Madison, Wisconsin which was near an earlier home of Lee and Walker. In 1873 Madison was designated as the county seat for Lake County, which was actually two years before the town was platted. However, controversy over the county seat continued for another decade.

At the same time that Lee and Walker settled by Lake Madison, Herman Luce and his family settled on the east shore of Lake Herman. This led to the development of the town of Herman on the northeast shore of the lake, which was platted in 1878. Also in 1878, Charles B. Kennedy came to Dakota Territory and homesteaded in a well drained valley between the two lakes.

In 1880, the Chicago, Milwaukee & St. Paul Railroad was extended west from Flandreau, first to Wentworth and then to C.B. Kennedy's homestead which was five miles north of the old town of Madison. Because of the railroad, Kennedy issued an invitation to these Madison residents to move to his homestead. The move was made and thus started "new" Madison where it is located today. The only building left in "old" Madison was the one with the safe which contained all the county records. The year after the move, the first train arrived in new Madison on January 18, 1881.

Kennedy had also invited the town of Herman to move to the new Madison town site. At first they refused and demanded that a new county seat be selected by the county commissioners. They wanted to be the county seat as did the town of Wentworth just eight miles east of Madison. Considerable rivalry and bickering ensued between Madison and Herman about the county seat designation until in the dark of one night, the county safe was mysteriously moved to the center of "new" Madison. Later, the territorial legislature named Madison as the legal county seat.

After considerable political maneuvering, name-calling and shady real estate deals, the people in Herman in late 1880 were persuaded to begin moving their businesses and homes to new Madison. By 1883 only about three buildings were left at the Herman town site, and Madison was on its way to becoming the modern town it is today.

Madison has always had a reputation of being a city of schools and churches. In 1881, C.B. Kennedy, who was by now the local representative to the territorial legislature, was successful in securing for Madison the Dakota Normal School, the first teacher education school in the territory. It was the beginning of what is now Dakota State University, one of the finest computer and information systems schools in the entire Midwest. The school has served the state continuously for 114 years. Other educational facilities in Madison began and grew with the town. Through the years, the school system has grown to include three public and one parochial elementary schools, a middle school, a senior high school, and Aim High, an alternative school. Additionally, special classes are offered by the Career Learning Center and other organizations.

The first religious services recorded for the area were in old Madison in 1873. These were conducted by a Baptist minister from Dell Rapids in the home of Bill Lee. The first organized church was the Presbyterian Church at old Madison in 1878. In 1877, a Norwegian Lutheran minister was believed to have conducted a service in the home of Torkel Hanson. This eventually led to the establishment of the Lake Madison Lutheran Church. As with education, religion and churches have grown with the community. Today, there are churches representing a wide variety of denominations in and around the city of Madison.

From the very beginning, Madison has been a progressive community having strong values in culture and the arts. In 1891, the Madison people built the Lake Madison Chautauqua on the northwest shore of Lake Madison, an institution which brought culture, education, inspiration, and entertainment to an appreciative audience. At first, the Chautauqua visitors came by horse and buggy and by a narrow-gauge steam railway that ran from Madison out to the Chautauqua grounds. Later, the Milwaukee line that ran from Sioux Falls to Madison built a spur into the Chautauqua. Literally thousands of visitors from a four-state area came to be entertained by the Chautauqua performers of national and international renown. Included on the Chautauqua billings were speakers, teachers, preachers, explorers, scientists, politicians, statesmen, singers, violinists, pianists, choruses, bands, orchestras, storytellers, jugglers, magicians, and many more. The Chautauqua lasted until 1933, although its effectiveness dwindled conspicuously in the last several years of its existence.

This tradition of culture continues through an active Madison Arts Council, local libraries, schools and museums. The community remembers and preserves its heritage in two outstanding museums. The Smith-Zimmermann Museum was built in 1960 on the campus of Dakota State University to reflect the ethnic background of the early settlers. Prairie Village was built on the shores of Lake Herman in 1966. In the mid-1970's, a steam railroad was added to the Village. Camping sites are also available.

Madison's physical environment, being situated between two glacial-formed lakes, has always had a strong appeal for outdoor enthusiasts. Many parks offer opportunities for picnicking, biking, hiking and jogging. Fishing, boating, hunting and golfing are popular recreational pursuits in the area. There is also snowmobiling and cross-country skiing in the winter. Nearby Lake Herman State Park and Walker's Point State Park offer excellent camping facilities.