Clay City is a Powell county town on the Red River. Iron ore was discovered in the area in 1786 and the first iron forge west of the Alleghenies was built here. The settlement was known as Collins Forge, for the Collins brothers who had discovered the ore and begun the mining and refining operation. An iron furnace was built by 1805 and the area became known as the Red River Iron Works. A post office of that name was opened by about 1820. In the 1880s the post office was moved a short distance and renamed Waltersville for a local family. The Clay City post office opened in 1883, probably named for a local family also. The population in 1990 was 1,173.