Agricultural Economics was first offered as a course of study in 1897 as a part of the agricultural curriculum. Several more courses in related subjects were offered over the following decades, culminating with the creation of a four-year program in Agricultural Administration in 1923 within the department of Business Administration. By 1927 Agricultural Administration had become a full department and was transferred to the School of Agriculture. Shortly thereafter, its name was changed to Agricultural Economics, with G. W. Forster named as its first Head, a position he held until 1950. In the 1930s, the Rural Sociology Department was merged into the Agricultural Economics Department, creating the Agricultural Economics and Rural Sociology Department. This situation lasted until 1940.

The department continued to grow in size and stature, attracting notable scholars and sizable research funding and expanding its scope of activities. In 1952 it began publishing its own magazine, the (now the ). In 1960 the department became heavily involved in the work of the Agricultural Policy Institute, which existed for the duration of that decade.

In 1965 the department merged with the Department of Economics, keeping the latter name. The new department was jointly run by the Schools of Liberal Arts and Humanities and Social Sciences. By 1990, this program had grown so large that it was split once again, and a new Department of Agricultural and Resource Economics was created under the College of Agriculture and Life Sciences.