The Montana Council of Defense was established in response to an order by President Woodrow Wilson which set up the National Council of Defense and requested each state to set up a state Council. Initially Governor Samuel V. Stewart appointed the Council by executive action. However, because of the lack of clear legal authority,the difficulty county Councils of Defense had in enforcing their regulations, and the desperate need for the state to purchase seed grain, the governor called a special session of the legislature in February 1918. The legislature officially established the Council in an act passed on February 20, 1918. The Montana Council of Defense was empowered, until the end of World War I, to "do all acts and things not inconsistent with the Constitution of laws of the State of Montana, or of the United States, which are necessary of proper for the public safety and for the protection of life and public property... and perform all acts and things necessary or proper so that the military, civil and industrial resources of the State may be most efficiently applied toward maintenance of the defense of the State and nation... and toward the successful prosecution of [the] War...." In order to carry out its duties the Council was put in charge of all organizations in the state that were involved with war work, including charitable associations. The Council was required to terminate its affairs within three months of the end of the war.

The Council was composed of the Governor and Commissioner of Agriculture and Publicity, serving ex officio, plus nine citizens appointed by the governor, at least three of whom had to be farmers. The Council was empowered to appoint a three member council in each County to coordinate local work.

Initially the Council concerned itself primarily with agricultural production which increased by 30%. The Council also promoted patriotic local meetings to boost enthusiasm for the war to counteract Montana's strongly anti-war labor unions, radical farmers, and large immigrant population. It was this war propaganda campaign which gradually led to the suppression of all dissent with which the Council eventually became identified. Many sedition trials were held and people identified as radicals or of questionable loyalty were publicly ostracised. Many of the problems of agricultural production for the War were drought-caused and could only have been solved, if at all, by direct government action. During 1918 the decline of Montana agricultural communities which culminated in the early 1920s, began. In spite of efforts by the Council to encourage agriculture, farm failures increased and the economy which agriculture supported also declined.

With the Armistice signed in November 1918, the Council quickly ceased active functioning although it was not formally dissolved until July 1921 after the United States had signed a treaty with Germany.