The Knob City Land Company surveyed and laid out the town, the main streets being wide, and began to sell lots about the same time as the Louisville & Nashville Railroad came through Barren County. The first train arrived at Cave City in 1859. The town took its name from a cave within the town limits, not nearby Mammoth Cave. A small creek ran through the cave which the L&N Railroad used as a source of water. The creek was called "Sink Hole Spring" and was the only water supply for the town at the time. The Cave City post office was established in January 1860 and Beverly Daniel Curd appointed the first post-master. He moved the post office established in 1850 at Woodland (about a mile north) to Cave City.