The highway essentially followed the route of a wagon road that had been constructed between Seattle and Ellensburg in 1867 (a route that, in turn, followed a trail that Native Americans had used for centuries). Seattle pioneer Henry Yesler led one effort to improve the original road in 1875, by offering his sawmill as the grand prize in a state lottery. About $30,000 worth of $5 tickets (roughly $1.1 million in 2004 dollars) were sold before the courts declared the lottery illegal. Yesler reportedly kept nearly all the money despite efforts by the Territorial Legislature and the commissioners of King County to salvage at least some of the funds for road building.
Interest in what Yesler had called "a great road" linking Seattle and Eastern Washington waned after the completion of the Northern Pacific Railway through the Cascades in 1883. Most passengers and freight moved on the railway. The Seattle & Walla Walla Trail & Wagon Road Company, based in Ellensburg, maintained the original wagon road for a few years, but it gradually fell into disuse.
In 1909, a transcontinental automobile race, planned as part of the Alaska-Yukon-Pacific Exposition in Seattle, led to new efforts to improve and extend the road. The commissioners of King and Kittitas counties appropriated enough money to clear the roadway of fallen logs and rebuild a few old grades and bridges. Eventually, about 150 cars used the route to travel to the fair. The project convinced state legislators to finance the construction of a new highway, designed for automobiles, not ox carts.
The highway, later designated Primary State Highway 2, was officially opened on July 1, 1915. Clarence B. Bagley, author of a 1916 history of Seattle, pointed out that Gov. Lister traveled to the dedication "in a high powered automobile," making the journey from Olympia to Snoqualmie Pass in a matter of hours (Bagley, 220). In contrast, when the original wagon road opened in 1867, Territorial Governor Marshall F. Moore (1829-1870) had taken days to travel the same distance by horseback.
The Sunset Highway was later rerouted at Teanaway (a short distance east of Cle Elum), turning north over what is now the Old Blewett Pass to the Wenatchee River Valley (along the route of today's U.S. Highway 97). From East Wenatchee, the highway turned northerly to Orondo and then easterly to Spokane (following today's U.S. Highway 2). Today Interstate 90 parallels the Sunset Highway's route through Snoqualmie Pass.