Cholame was originally a rancheria of the Salinian Indians. Later Rancho Cholame became the property of R.E. Jack and Frederick Adams. The land was sold to the Hearst Corporation in 1966 and is still a working cattle ranch.
The town is best known as the place where actor James Dean died on September 30, 1955. Dean died one mile (1.6 km) to the northeast, at the junction of State Highways 41 and 46, when college student Donald Turnupseed made a left turn without seeing Dean's Porsche 550 Spyder approaching in the oncoming lane. On September 30, 2005, the State of California officially commemorated the 50th anniversary of Dean's death by naming State Highways 41 and 46 as the James Dean Memorial Junction. A few hundred individuals, including State officials, a Dean family member, several Dean archivists, and loyal fans gathered in at the junction and at Cholame to pay tribute to Dean. Cholame has a restaurant and a memorial to James Dean erected in 1977 by a retired Japanese businessman from Kobe, Seita Ohnishi. The monument is made of stainless steel and surrounds a tree of heaven, a china-sumac.