American Flag was founded by prospectorIsaac Lorraine as the American Flag mine and mining camp in the late 1870. In 1881 the town was sold to the Richardson Mining Company of New York. The town was small and had a population of about forty on average. Little is known about the mining camp at this time. Eventually Isaac Lorraine would turn his attention to cattle, where he later built the American Flag Ranch. By 1884, the population was only fifteen so the post office closed a few years later and the town was left unoccupied.
The post office was moved to the American Flag Ranch headquarters in 1880. The building still stands, and is the oldest surviving territorial post office building in Arizona. The building is now on the National Register of Historic Places, and is preserved by the Oracle Historical Society.