Evidence of permanent dwellings like those at Montezuma Castle begins to appear in the archaeological record of Arizona's Verde Valley about 1050 AD. The first distinctly Sinagua culture may have occupied the region as early as 700 AD.

 A diorama of what the castle would have looked like when it was in use

The area was briefly abandoned due to the eruption of Sunset Crater Volcano, about 60 miles (97 km) to the north, in the mid-11th century. Although the short-term impact may have been destructive, nutrient-rich sediment deposited by the volcano may have aided more expansive agriculture in later decades. During the interim, the Sinagua lived in the surrounding highlands and sustained themselves on small-scale agriculture dependent on rain. After 1125, the Sinagua resettled the Verde Valley, using the reliable watershed of the Verde River alongside irrigation systems left by previous inhabitants, perhaps including Hohokam peoples, to support more widespread farming.[1]

The region's population likely peaked around 1300 AD, with the Castle housing between 30 and 50 people in at least 20 rooms.[2] Radiocarbon dates from multiple construction beams show that the cliff dwelling was probably constructed in the middle 1100s AD with remodeling and additions in the last decades of the 1200s.[3] A neighboring segment of the same cliff wall suggests there was an even larger dwelling ("Castle A") around the same time, of which only the stone foundations have survived. Its discovery in 1933 revealed many Sinagua artifacts and greatly increased understanding of their way of life.

The latest estimated date of occupation for any Sinagua site comes from Montezuma Castle, around 1425 AD. After this, the Sinagua people apparently abandoned their permanent settlements and migrated elsewhere, as did other cultural groups in the southwestern United States around that time. The reasons for abandonment are unclear, but possibilities include drought, resource depletion, and clashes with the newly arrived Yavapai people. Due to the very little human contact since abandonment, Montezuma Castle was well preserved.[4] It was heavily looted in the late 19th and early 20th centuries, though other Sinagua sites have remained more or less intact. Because of the rise in settlers, tourists and industries in or surrounding Montezuma Castle, the monument and even Verde Valley have been threats to the preservation of Montezuma Castle.[4]