The Town of Bonanza was developed at an old Modoc Indian site, situated along the Lost River where the Langell, Poe and Yonna Valleys converge. The area's Indian name of "Nushaltkaga" refers to the many springs which characterize the area.

There are many meanings for the word Bonanza. As the story goes, the Indians came from the direction of Lakeview and spotted the Big Springs. They were so happy to find water that they called the site Bonanza, meaning "water plenty." Another possibility is that the white settlers, who arrived in the late 1800's named the area Bonanza, a Spanish word meaning prosperity.

Prosperity is what this land has offered its residents throughout the years, furnishing them with excellent farm and range land, wood for their homes and businesses, and an excellent climate. The town was founded by J.P. Roberts in 1876, and platted by Benjamin Price in 1878. The town was incorporated in 1901.

Today, Bonanza is a stable farming and ranching community of 420 people. Although the town has been repeatedly plagued by disastrous fires, it has been rebuilt and now has several fine businesses and facilities.