The community originated in 1883 as a flag station on the newly constructed Omaha railroad at the crossing of Bear Creek within the town of Oak Grove, Barron County. A post office at the site was named "Haugen" on December 5, 1889 after United States Congressman Nils P. Haugen of River Falls, Wisconsin, a native of Norway, who was a political ally of the famed "Fighting" Bob LaFollette. The naming of the village is explained in Haugen’s autobiography, "Pioneer and Political Reminiscences":

In 1918, the village became incorporated. The report of the subsequent census of 1920 indicated a population of 426 persons, which was the historical high point in the number of residents.