The Unemployment Compensation Commission was established by an act of the Montana Legislature in 1937 "for the compulsory setting aside of unemployment reserves to be used for the benefit of persons unemployed through no fault of their own". The act provided the means for assessing, collecting, administering, distributing, and investing contributions derived from payrolls of employers, and also provided penalties for violations of the act. The Commission at that time was composed of the Montana State Employment Service Division and the Unemployment Compensation Division.

In 1969 the name of the Unemployment Compensation Division was changed to the Unemployment Insurance Division of the Employment Security Commission. Then in 1971 the Division became the Unemployment Insurance Bureau of the Division of Employment Security under the Department of Labor and Industry. The Bureau again became the Unemployment Insurance Division in 1982. It was then composed of an Administrative Support Bureau, a Benefits Bureau, a Contributions Bureau, an Employer Services Bureau, an Unemployment Insurance Section, and an Unemployment Insurance Claims Investigation Section. After 1985 the sections were incorporated into other bureaus and divisions and the remaining bureaus experienced only minor name changes.