The Chinese began to arrive in California in large numbers after the discovery of gold at Sutter's Mill in 1848. Their arrival was part of a complex economic relationship between China and the United States in which the Chinese became a major source of labor for the economic development of the American West.

Most of the Chinese that came to the western United States were from southeastern China and of Cantonese decent. The victims of war, natural disasters, and political and economic oppression, they were attracted to California by the promise of gold and opportunity. Many were laborers and farmers, but merchants, craftsmen, artisans and students also came in search of opportunities. Their exodus from China was aided by the ongoing development of Hong Kong as an international port. By 1870, the Chinese made up nearly 25 percent of California's unskilled labor force, but only 10 percent of the state's total population. Ten years later, the Chinese comprised two-tenths of one percent of the U.S. population. Ninety-nine percent of these Chinese lived in the West, nearly three-quarters of them in California.

In cities and towns, many Chinese became domestic servants, cooks, laundrymen, and held other service jobs. The Chinese also made up the majority of workers in such light industries as garment, shoe, and cigar making factories. When the railroad opened up jobs to the Chinese, thousands signed up to work. As early as 1858 the Chinese were building intrastate railroads, and in the 1860s they were instrumental in building the western portion of the transcontinental railroad from Sacramento, California to Promontory Point, Utah.

In the beginning most of the Chinese came to California to work temporarily, but many eventually made California their home. Their presence led to the creation of Chinese communities commonly referred to as "Chinatowns." These enclaves were segregated and considered an exotic curiosity by mainstream America. They had their own form of self-government organized under the leadership of merchants' guilds and district associations.

When the economy declined, unemployed white workers accused Chinese workers of causing the nation's demise. Anti-Chinese hysteria permeated California politics. The state's labor unions claimed Chinese immigration would destroy the nation's democratic structure. This Sino phobia was realized in murders, exclusion, and the total destruction of the Chinese communities by the passage of anti-Chinese legislation. California's 1879 Constitution even contained a specific section on how to eradicate the Chinese from the state.

On May 6, 1882, the federal government, influenced by powerful anti-Chinese lobbyists from California, passed the Chinese Exclusion Act, which barred entry of all Chinese laborers into the United States for ten years. This marked the first time immigration to the United States was banned on the basis of race and class. Still dissatisfied with the presence of "too many" Chinese in the United States, the government continued the Exclusion Act until 1904, when it was extended indefinitely. Similar restrictive immigration policies were eventually applied to other Asian ethnicities.