The formation of the Sauk River Watershed District began in September of 1982 when two local civic groups from Richmond and Cold Spring (Lions Clubs) were looking for a public service project in the area dealing with water quality of the area lakes. At an initial meeting of the two groups, approximately 50 people expressed concern over the degraded condition of the area's lakes. Because of concerns expressed by such a large number of people at the meeting, the group felt the matter was beyond the scope of what a civic organization could handle.

On September 30, 1982, a non-profit organization known as the Sauk River Chain of Lakes, Inc. was established to address water quality issues. By March of 1983, a two-year diagnostic lake study, headed by Dr. Keith Knutson, Ph.D. of St. Cloud State University, was underway. At about the same time, the Minnesota Pollution Control Agency also initiated a similar but less comprehensive study. Both studies were completed early in 1985.

As a result of the studies it became apparent to the Sauk River Lake Chain of Lakes Association, Inc. that any remedial work or additional studies would require a larger financial backing than the members of the association would be able to supply. Consequently, an attorney was contacted to determine the feasibility of forming a watershed district. On January 17, 1986, a petition signed by 400 landowners was filed with the Minnesota Water Resources Board (WRB) for the establishment of the Sauk River Watershed District. Additional petitions were filed on January 21; February 05, 21, and 26, 1986.

Public hearings were held in Cold Spring and Osakis on March 13, 1986 and March 26, 1986, respectively, and the report of the presiding administrative law judge was received by the WRB on May 19, 1986. As a result of the studies, public testimony, and conditions of the water resources, the WRB established the Sauk River Watershed District on July 22, 1986.