Steele City was established in 1873 when the St. Joseph and Western Railroad extended service there, and was named for Dudley M. Steele, a railroad official. Its Main Street area is preserved today as the Steele City Historic District on the National Register of Historic Places, alongside the separately listed District No. 1 School.

Steele City is an incorporated village with a 2020 Census population of just 47, down sharply from 84 in 2000. Its ZIP code is 68440. Its most distinctive modern feature is serving as a major junction for the Keystone Pipeline system, where crude oil from Alberta splits into branches heading toward Illinois and toward Oklahoma and Texas refineries — a significant piece of continental energy infrastructure running through a village of fewer than 50 people.