Originally known as Allen’s Siding, Clayton received its name after the discovery of abundant clay in the surrounding hills. The town was formed in 1889 when the railroad came through. A brick manufacturing plant was built in 1893. It burned in 1897. The plant was re-built, only to burn again in1908. The fire of 1908 started in a pile of hay in the Clayton Mercantile Company. To this day, no one knows if this was a case of arson. Many other stores burned as well, but the new Terra Cotta plant was thankfully spared.

     Washington Brick and Lime Company was the biggest brick plant in Washington. In the early days horses were used to haul the clay. The plant was powered by cord wood; later, coal was used. The machinery was driven by steam engines and the wares were dried with steam heat. Eventually everything was powered by electricity and motorized vehicles replaced the horses.

     The Terra Cotta plant made ornamental stone, which, among other things, was used on the Stevens County Courthouse and the Paulsen Medical Building. Altogether, about sixty men were employed in the two plants. The Terra Cotta plant had chemists, draftsmen and modelers.

     Besides the clay industry, people found work harvesting local timber, and farms and dairies popped up to serve the growing community. A brick school was built in 1912 and forty students were enrolled. The school was consolidated in 1957, but the classrooms are still used as extras by the Deer Park district. The gymnasium is still used for various activities.

     The "Company Town" built stores and boarding houses to accommodate its employees. A park and two churches were built. However, no taverns or bars were allowed within the city limit. This rule was written into the conditions of the land deed.

     In 1957 Clayton was struck by another fire. No one was hurt, but the E&M Mercantile store was ruined. That same year the brick plant was shut down by its parent company. Within three years, the once prosperous clay plants were destroyed.