In 1889, after the Wyoming Territorial Prison had burned down in Laramie, it was officially moved to Rawlins. The soon-to-be State Penitentiary (Wyoming achieved statehood in 1890) was not completed until 1901. During that time, the town had grown, and the prison ended up being in the middle of it. In 1981, a new prison site was established south of town, where inmates are housed today. The old Frontier Prison is now a museum and historic site.

Rawlins is also known for being the site of an iron oxide deposit mined for paint pigment. "Rawlins Red" paint is still used on barns and houses across America, and was the original paint chosen for the Brooklyn Bridge, which was approved by General Rawlins himself, then Secretary of War for the U.S. Government.