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John and Daniel Murphy were part of the Stephens-Townsend-Murphy Party, the first immigrant party to bring wagons across the Sierra Nevada to Sutter's Fort in 1844. They earned a living as merchants, but like many others, began prospecting when the California Gold Rush began. They first started in Vallecito, which was known as "Murphys Old Diggings," before moving to another location in 1848 which became "Murphys New Diggings," "Murphy's Camp," and eventually just "Murphys."
The placer mining in this location was wildly successful. Miners were limited to claims of 8 square feet (0.75 m
) and yet many were still able to become rich. The Murphy brothers themselves, however, made far more money as merchants than as miners. In fact, John was so successful that he left town at the end of 1849 and never returned, having a personal fortune of nearly $2 million. Roughly $20 million in gold was discovered in Murphys and the surrounding area. Two of the richest diggings were named Owlsburg and Owlburrow Flat.
Murphys was also a popular destination as a tourist resort, as the nearby giant sequoia trees in what is now Calaveras Big Trees State Park were a major draw, and they continue to be so today. After visiting, John Muir wrote in his book,
Like many other mining towns, fire was its bane and the town was destroyed three times by flames, in 1859, 1874, and 1893. After the second major fire, there was little gold left to mine, and so the town was never rebuilt to its boomtown condition. However, Murphys continued to thrive as a merchant center, supplying many of the silver mines in Nevada with provisions via Ebbetts Pass. The town is registered as California Historical Landmark #275.
The first post office was established as Murphy's in 1851. The name was changed to Murphy in 1894, and finally to Murphys in 1935.