The falls were created by the eruption of nearby Lava Butte approximately 6,000 years ago, as the lava flow dammed the Deschutes, forming a lake known as Lake Benham. The river eventually flowed over the dam, draining the lake and thus forming Benham Falls. Around 1885, J. R. Benham attempted and failed to file a land claim near the falls, though they were later named for him.