Located above the placer gold deposits along Interstate 80, Colfax wasn't founded until 1865, when the Central Pacific Railroad reached here. First called Illinoistown, the named was changed when Ulysses Grant's running mate, Schuyler Colfax, stopped by.

Colfax was the eastern terminus for the Nevada County Narrow Gauge Railroad. Gold shipments from the gold-rich towns of Nevada City and Grass Valley were transported via this line to the main rail line. During its lifespan, the little line transported over $300 million in gold. Mine tailings were used for the rail bed, leading some miners to prospect in the rail bed itself. By 1942, the line met its demise when the rails were used for scrap metal during World War II.

In 1990, the population of Colfax was 1,306.

In June-September of 2000, the median price for a home was $188,000, or $135 per square foot.

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