Agate was originally named the town of Gebhard, and was established by the Union Pacific Railroad about 1876. The Gebhard Post Office opened on April 8, 1881. The name of the town was changed to Agate on April 24, 1882. The town's name was changed as a locality used by the local ranchers prior to the construction of the railroad. The town's name comes from an "A-gate"- a wooden gate with an "A" shaped cross-brace. When the railroad was constructed, many corrals were located in the "town" for ranchers to herd their cattle to, which were then loaded on the train to be shipped. The Agate gate is still standing today in the middle of town off the intersection of Main Street and 2nd Avenue.
At one time Agate was a bustling town, hosting three motels, three grocery markets, a cafe, a bank, two dealerships, a lumberyard, a grain elevator, and much more. Today it is the home to the Agate School District, a local phone company, a local internet company, a realty business, and approximately 50 residents. Most of the community resides on the outskirts of Agate and are farmers and ranchers.