In 1877, the Southern Pacific Railroad completed its line through the desert to the Pacific Ocean. A Congressional policy established that every odd section of land for 10 miles on either side of the track became the property of the railroad (a section was defined as one square mile). The even-numbered sections remained the property of the federal government.

World War II brought rapid growth to Palm Springs with many new housing developments and businesses. The Desert Museum opened its doors in 1938, a public library was established in 1939 and the Desert Hospital opened in 1951.  In 1938, Palm Springs opened the first high school in the Palm Springs Union High School District, which, in in 1948, was combined with the Desert School District to form the Palm Springs Unified School District. Prior to this, high school students from the area were bused daily to nearby Banning.

Hollywood discovered Palm Springs as early as about 1919. The desert was considered a choice filming spot for many silents, and stars such as Rudolph Valentino, Ernest Torrence, and Theda Bara could be easily spotted in town. Since then, Palm Springs has become known as "The Playground of the Stars." Many have had homes in the City or have stayed at famous places such as the El Mirador Hotel and Charles Farrell's Racquet Club. Spotting a movie star walking down the street, shopping or in a restaurant was a common occurrence.

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