The name of the town seems to have been derived from an early resident - a German trapper named Siegfried Kaspar. Kaspar ran a string of traps along Caspar Creek to collect bobcat, cougar, fox, otter, weasel, and racoon pelts which he sold to the fur trade. His origin is not recorded but it is suspected that he was a deserter from one of the ships from Europe that were beginning to ply the coast in the mid 18th century.
Caspar or Kasper was followed by William H. Kelley and Randall who built the first sawmill. They sold the mill to Jacob Green Jackson, who boosted the timber yield to 25,000 board feet per day. Henry Krebs, the son-in-law, took over upon Jackson's death in 1901 and operated the mill as the Caspar Lumber Company until 1955 when the mill was closed.
Caspar still has numerous original buildings from its earlier days. The Caspar Inn has been continuously run as a Roadhouse and Bar since 1906. The first business at the town was a saloon, this was followed by a blacksmith shop, a shoe shop, and the Doyle store. A post office was established in June 1874. By 1880, an express and telegraph office, and electricity appeared by which time the population of Caspar had reached about 500.
The old Caspar Church is now the Caspar Jewish Community Center. Evidence of the Caspar Lumber Company are everywhere, from the quaint stucco Paymasters' building at the south end of town to the big white house on Caspar Road just north of the North Coast Jewish Community Center. This beautiful craftsmen-style home was once the residence of the Company manager.