Grandfalls is at the intersection of State highways 11, 18, and 329, on the Pecos River in southeastern Ward County. It was named for its location on the upper, or grand, falls of the river. The area near the falls was an early campsite for travelers. The first settlers came in the late 1880s, attracted by the steady supply of water in the river and by the natural beauty of the countryside. Among them were the families of two brothers-in-law, R. I. Carr and J. T. Sweatt. These farmers built a brush dam above the lower, or great, falls near the site of the present State Highway 18 bridge and powered their cotton gin by the falls. On July 12, 1892, the Grandfalls school district was established, and a school building was constructed on the Carr farm. Mamie McFadden taught in the 1892–93 term. The building was also used for a union church consisting of seven denominations. In 1894 a flood demolished the raceway that powered the cotton gin, formed a new river channel, and destroyed the dam at the lower falls. Some farmers left after the flood, but the Carr and Sweatt families rebuilt the brush dam and constructed new canals to extend irrigation. A post office was opened in 1897 with James G. Baker as postmaster. In the late 1890s a land-development company laid out the town, and the Texas and Pacific Railway advertised land for settlement. Hardware, feed, and lumber stores were built. A dry-goods and grocery store, a hotel, and a blacksmith shop also opened. In the 1890s a number of Scandinavian families moved to the community and established St. Gertrudis Catholic Church. One of them, Dr. Charlotte Bergman, founded a medical practice. Although women physicians were rare in West Texas in 1897, she was well received and was successful in fighting tuberculosis in the area.
After 1900 Grandfalls had a steady supply of drinking water, the First Baptist Church was organized, a new school building was built, and the community received telephone service. During the 1906–07 school term the town reported one school, 105 students, and two teachers. A bank was chartered in 1906. By 1914 it had merged with a Pecos bank. A severe drought hit the Pecos valley in 1916, and many settlers left Grandfalls. In 1925 the town had a population of 250. In 1928 oil was discovered in Shipley field, near Royalty, three miles north of Grandfalls. The boom increased the population of Grandfalls to 500 by 1929. During the boom the school in Grandfalls changed its name to Grandfalls-Royalty. By 1939 Grandfalls had a population of 600 and twenty businesses. The town incorporated in 1940. Throughout the 1940s it had a population of 653 and twenty businesses. The population was around 1,000 during the 1950s and 1960s. The number of businesses increased to seventy-two by 1961 but fell to twenty-five by 1970. During the 1970s and 1980s the population wavered between 557 and 981, and the number of businesses between seven and twenty-five. In 1990 Grandfalls was a small incorporated community; it had a post office, sixty-three businesses, and a population of 583. The population dropped to 391 in 2000.