The United States government's construction of Hoover Dam, a hydroelectric and reservoir project started on the Colorado River in 1931, was one of the most important developments in Las Vegas history, dramatically affecting its population to the present.

In the first quarter century after its unofficial founding during a land auction in 1905, Las Vegas was still known mainly as a major railroad hub in a broad, underdeveloped desert valley between Utah and California. By 1930, Las Vegas had only about 5,200 residents. Nearly all of its small hotels, stores, and other businesses were concentrated on one main thoroughfare, Fremont Street. The town was infamous for its lax enforcement of liquor laws during Prohibition and its backroom brothels on Block 16.

Las Vegas government and business leaders had long heard of plans for a dam project about thirty miles southeast of Las Vegas. In 1928, Congress passed the Boulder Canyon Act (the dam was originally called Boulder Dam and was renamed Hoover Dam, after President Herbert Hoover, in 1947). The city expected the dam to attract manufacturing and other industries seeking cheap and abundant vacant land. But they were disappointed. Major businesses, seeing the lack of housing, water, power, higher education, and other infrastructure in Las Vegas, instead settled in other western states.

The city's disappointment grew after Secretary of the Interior Ray Lyman Wilbur visited the dam site and Las Vegas in 1929. He announced that the construction workforce of 5,000 would live in a new town his department would build, closer to the construction site. Originally designated the Boulder Canyon Federal Reservation, it was later called Boulder City. The government proclaimed that it hoped to house its workers in “a wholesome American community” of “flowers, schools and playgrounds” instead of Las Vegas, which Wilbur called “a boisterous frontier town.”

But even as the government started building Boulder City in 1931, development in Las Vegas took off, thanks to new infrastructure and supplies of water and power. Plans were submitted that year for forty buildings in Las Vegas, including offices, warehouses, and many small homes. The city's population increased to 7,500 in only one year by 1931. By the next year, the Union Pacific Railroad spent $400,000 to improve its Las Vegas rail yard, and Clark County approved an $80,000 expansion of its courthouse to handle the increase in legal cases. Meanwhile, the city struggled to help support hundreds of people who came to town looking for work at the dam and wound up living in tents outside of town. The city had to seek funds from the U.S. government to feed and house indigent persons into the mid-1930s.

Federal spending on the $175 million Hoover Dam project began in 1930, and Las Vegas enjoyed much of it. Money spent in Las Vegas related to the project totaled $70 million by 1939. Projects from federal funds—mostly New Deal programs—in the 1930s included paved roads, sewers and a $300,000 federal building downtown. The city itself spent money, mostly from loans in the form of bond issues, to install new street lamps, improve its police and sanitation departments, and build a new high school and hospital.

Other changes were in store in anticipation of the dam's construction. In 1929, Consolidated Power & Telephone had opted to split into separate power and phone companies. The new Southern Nevada Telephone increased its network and brought long distance calls to Las Vegas. Southern Nevada Power updated its grid and later hooked it into Hoover Dam, to bring cheap power to Las Vegas and area neighborhoods, when the dam started generating electrical power in 1937.

Construction began on Boulder City in March 1931 by Six Companies, Inc., the firm the federal government had awarded the contract to build Hoover Dam. The dam's payroll was $500,000 per month. Las Vegas businesses successfully lobbied the federal government to require Six Companies to pay its workers in U.S. currency and not in company scrip accepted only in stores in Boulder City.

The legalization of casino gambling by the Nevada Legislature in March 1931, which enabled Las Vegas to open and operate legal casinos, also increased revenues from dam workers who came into town after work or on payday. During construction, the Hoover Dam project quickly became a national tourist attraction. Thousands of these visitors spent money in Las Vegas hotels, casinos, and other businesses. In 1932 alone, 100,000 people visited the dam construction site, and 200,000 visited Las Vegas. By 1934, 265,000 people went to the dam site and 300,000 went to Las Vegas. In the 1930s, an estimated seventy-five percent of those visiting the dam also stopped in Las Vegas.

The Hoover Dam project also provided the water supply crucial to developing Las Vegas for decades to come. Under the Colorado River Compact—which awarded seven states bordering the Colorado River shares of 7.5 million acre feet of water—Nevada received 300,000 acre feet. The dam's water supply from Lake Mead made possible the large, master-planned communities such as Summerlin and Green Valley in Southern Nevada. Without the dam and its water supply, the greater Las Vegas metropolitan area would never have seen its population grow to nearly two million by the year 2000.