After the discovery of gold at Sutter's Mill in nearby Coloma, California, by James W. Marshall in 1848 sparked the California Gold Rush, the small town now known as Placerville was known as Dry Diggin's after the manner in which the miners moved cartloads of dry soil to run water to separate the gold from the soil.

Later in 1849, the town earned its most common historical name, "Hangtown", because of the numerous hangings that had occurred there.However, there is debate on exactly how many lynchings occurred in the town.The town had no police force (in 1849) and five immigrants attempted robbery of a Mexican gambler. Of the five immigrants, two Frenchmen and one Chilean were known wanted men, and they were not given any trial, instead they were hanged on an oak tree on Main Street by a mob.