Wauconda was founded in 1898 as a mining community. Three brothers from Wauconda, Illinois, discovered gold in the area and decided to name the mine after their hometown. Four mines, the Oregonian Mine and three Wauconda Mines, eventually operated in the area, quickly swelling the area's population to over 300. By 1900 the town had a general store, and by 1901 it had a post office, although the location was two miles west of the original camp. At its peak there were about 1000 residents.
In the early 1900s the output of the mines declined and they were eventually closed. In 1929, the state built Highway 20 on a route that bypassed the town, so the town was relocated to be on the new road. The abandoned former town location is now a ghost town.
Present-day Wauconda is much smaller than the old mining boomtown. Its small commercial district has a post office, gas station, general store, and restaurant, all with a single private owner. In 2008, owner Daphne Fletcher placed the town's commercial properties, along with a residence, up for sale with an asking price of $1,125,000. In March 2010, Fletcher put the combined properties on the eBay online auction website, promoting the sale as a "town for auction". A couple from Healesville, Victoria, in Australia, won the auction with a purchase price of $370,601, but failed to complete the transaction due to financial and health concerns. Two weeks later, the town was sold to a couple from Bothell, Washington, for $360,000.