In August 1906, John Huddleston found two strange crystals on the surface of his 243-acre (98 ha) farm near Murfreesboro, Arkansas, and soon became known as the first person outside South Africa to find diamonds at their original source. The following month, Huddleston and his wife, Sarah, sold an option on the 243 acres (98 ha) to a group of Little Rock investors headed by banker-attorney Samuel F. (Sam) Reyburn, who undertook a careful, deliberate test of the property.

After 1906, several attempts at commercial diamond mining failed. The only significant yields came from the original surface layer, where erosion over a long period of time had concentrated diamonds. In the early period, 1907-1932, yields from this "black gumbo" surface material often exceeded thirty carats per hundred loads (50 mg/Mg) (standard 1600-pound tramload of the early period). Highest yields from the undisturbed subsurface material (described as kimberlite or volcanic breccia, by the U. S. Geological Survey) were two carats per hundred loads (3.5 mg/Mg) in 1908 and about two carats per hundred short tons (4.4 mg/Mg) in 1943-1944.

Because equipment of the early period usually included bottom screens with mesh larger than 1/16th inch (1.6 mm), thousands of smaller diamonds were allowed to pass through. The bulk of these ended up in drainage cuts of varying depths all over the field and in the big natural drains on the east and west edges of the diamond-bearing section of the volcanic deposit (approximately 35 acres (14 ha) of volcanic breccia on the east side of the 80-acre (32 ha) pipe). In recent decades, those small diamonds have been the bread-and-butter of recreational diamond-digging.

Soon after the original diamond was found, a "diamond rush" created a boomtown atmosphere around Murfreesboro. According to old tales, hotels in Murfreesboro turned away 10,000 people in the space of a year. Supposedly these aspiring diamond miners formed a tent city near the mine which was named "Kimberly" in honor of the famous Kimberley diamond district in South Africa. On the other hand, all available evidence indicates the Town of Kimberly originated as a land-development venture in 1909, initiated by Mallard M. Mauney and his oldest son Walter on their land immediately south of Murfreesboro. The project failed soon afterward as the speculative boom generated by the diamond discovery collapsed. Today the Kimberly area is almost all cow pasture, owned by Mauney's descendants.

From 1951 to 1972, the crater hosted several private tourist attractions. The first, The Diamond Preserve of the United States, lasted only about one year. In late 1951, Howard A. Millar stepped in and salvaged the infant tourist industry. In April 1952, Millar and wife, Modean, launched their "Crater of Diamonds" attraction. Howard Millar, an accomplished writer and promoter, stirred unprecedented national publicity and drew enough visitors to sustain the operation. In March 1956, a visitor found the "Star of Arkansas" on the cleared surface. The rare beauty weighed 15.33 carats (3.07 g). Later, Roscoe Johnston opened a rival tourist attraction, the "Arkansas Diamond Mine," on the main part of the diamond field.

The rivalry between the two tourist operations left both in a weakened position. In 1970 the entire volcanic formation was consolidated by a private partnership which then reassigned the property to General Earth Minerals of Dallas, Texas. GEM expected to turn the property over for a profit, but ended up heavily indebted to GF Industries of Dallas. Upon default, GFI took the property in July 1971.

GEM consolidated the tourist operation as well as the property. GFI continued the attraction until it sold the 80-acre (32 ha) volcanic formation and some 800 acres (320 ha) surrounding to the State of Arkansas in March 1972, for $750,000. The tourist operation continued as the centerpiece of Crater of Diamonds State Park.

Due in part to the park, and also because Arkansas was the first place outside South Africa where diamonds were found at their original volcanic source, this special gem has come to be associated with the Natural State. A large diamond symbol has dominated the state flag since the early years. The Arkansas State Quarter, released in 2003, bears a diamond on its face.