Canyon City, Oregon is located about a mile south of the town of John Day along U.S. Highway 395. The population was 669 at the 2000 census. In 1890, there were only five families living in Canyon City. As the railroad arrived, the town became a major shipping and receiving center for coal and lumber. The land donated by Conner was redeveloped as cattle pens. The city's first post office opened in 1864 and by 1891, it had become incorporated. As a pioneer town, the town had trouble with outlaws and Indians, and stage robbery was a common occurrence.
Compared to other cities in Oregon, Canyon City has a low rent burden, which measures how much a household pays for rent. This measure helps determine the affordability of housing in the city. The rent burden is lower in Canyon City than in most other Oregon cities, which are ranked first or second by rent burden. The rent burden of neighbors in the area is also lower: Joseph and Mount Vernon are both under 26.7%. While Canyon City's rent burden is lower than the state average, it is higher than other nearby towns.
The town's first name was Canon City, after the nearby Grand Canyon. The town was first established in 1859, intended to be a commercial hub for gold miners in the Pikes Peak area. Several years later, A. M. Cassaday drilled an oil well just outside the city limits. Cassaday soon drilled several more wells in the same area and created the first commercial oilfield west of the Mississippi. He refined the crude oil and shipped it directly to Denver for sale. The town grew.