The Montana State Highway Commission was created in 1913 by the state Legislative Assembly. The original Commission was composed of three members. In 1917 new legislation altered the organization of the Commission by authorizing the appointment of twelve members according to geographic highway districts. Membership was changed again in 1921 to three members appointed by the Governor and in 1941 to five members, also appointed by the Governor. In 1971 the Commission was renamed the Montana Department of Highways, created by Chapter 7 of the Executive Reorganization Act of 1971 and implemented by executive order of the Governor on December 16, 1971. The Department of Highways took over all but the advisory functions of the State Highway Commission.

By 1972, the Department consisted of seven divisions: the Legal Division, Personnel Division, Centralized Services Division, Engineering Division, Motor Pool Division, Gross Vehicle Weight Division, and the Maintenance Division. Each division was headed by an administrator. The Centralized Services Division, Engineering Division, Motor Pool Division, Gross Vehicle Weight Division, and the Maintenance Division were furthered sub-divided into bureaus, headed by Chiefs. In 1991, the Department of Highways became the Department of Transportation.

The Montana Department of Highways Right of Way Bureau was given the responsibility, under the Montana Outdoor Advertising Act of 1971, to inventory signs along Montana's interstate and primary highways, license those which were legal, and remove those which were not legal.