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Hurley took its name from Canadian-born M. A. Hurley, a prominent attorney of Wausau who won a lawsuit for the Northern Chief Iron Company in 1884. The compensation for winning the lawsuit was that he asked for no fee, but only requested that the town involved in the case be named after him. M.A. Hurley held stock in the Northern Chief Iron Company. The full name "Glen Hurley" was used for one year, but in 1885, the first name was dropped and the community became known as Hurley. The first Plat Map of Glen Hurley was recorded in the Ashland County Register of Deeds by C.N. Nutter, surveyor for the Northern Chief Iron Company of Wausau, in December 1884. Hurley did not become a city until April 1918. Previously, it was part of the town of Vaughn, named after Samuel S. Vaughn, pioneer resident of Ashland, for whom the Vaughn Public Library is named. When the city of Hurley was created, the town of Vaughn was dissolved and divided among the City of Hurley, the Town of Oma (Finnish for "Our Own"), the Town of Carey, and the Town of Kimball. Henry Meade was the first mayor of Hurley. John Ankers opened Hurley's first saloon and served as the first clerk for the Town of Vaughn, first Justice of the Peace, and first fire chief. In early November 1887, ten people were killed in a fire that started in a three-story theater and spread to other structures.

The Gogebic Range Directory of 1888 states: "During the past summer, Hurley was twice visited by terrible fires. The first occurred of June 28 and the second on July 9. These destroyed almost the entire business portion of the city, and at first it was thought that they would prove a crushing blow to its prosperity, but later events have proven that they were blessings in disguise. The wonderful pluck and energy of its businessmen were fully demonstrated when they at once began the erection of fine brick buildings in the place of the wooden ones destroyed. The result has been that the burned portion has been rebuilt with brick and stone, making them nearly fireproof. And Silver Street is one that a much larger city could well be proud of."