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Lakefield is situated in the center of Jackson County, in southwestern Minnesota. Minnesota Highway 86 is the chief route through the city, and Exit 64 of Interstate Highway 90 is about two miles south of Lakefield. Okabena is about eight miles northwest, and Jackson, the county seat, is thirteen miles southeast. Other nearby communities include Bergen, Brewster, Heron Lake, Rost, Round Lake, Sioux Valley, and Spafford. During the first half of the 1800s, southern Minnesota was inhabited by the Sioux, and what is now Jackson County was home to the Lower Sisseton Sioux Tribe until 1851, when a treaty opened the area to white settlement. The town of Springfield, which later became Jackson, was formed, as well as Belmont Township, although they were later deserted temporarily due to Sioux attacks. In 1867, Anders R. Kilen, who had homesteaded in Belmont Township, decided that a piece of land in Heron Lake Township would be a good location for a town, as it was higher in elevation than the surrounding area, and the land was drained on all sides, and Heron Lake was only a mile away. He bought the original site of the town of Lakefield from the St. Paul and Sioux City Railroad, and then negotiated with the Southern Minnesota Railroad for a side track to the area. The townsite was surveyed and platted in 1879, and had no trouble selling home lots. New settlers referred to the new town as Bethania, but Kilen had it incorporated as Lakefield. A train depot was built less than two months after the town was incorporated, and within a year Lakefield had a hotel, a post office, two hardware stores, a lumber yard, saloon, several grocery stores, and several grain dealers.

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