After splitting off from the Carson party at Angels Creek, John and Daniel Murphy headed east looking for likely prospects. The brothers reached Coyote Creek in October of 1848, and after a few pans showing good color, they set up camp and christened the site Murphys Diggings. The boys worked the stream for a few months and then decided to move on and search for better diggings. They eventually settled down about six miles away, where the y founded the camp now known as Murphys, afterwhich their original camp was referred to as Murphys Old Diggings.

Mexican miners began to drift into the abandoned camp, which they re-named Vallecito, meaning "small valley" in Spanish. They built their camp in the typical fashion of their homeland, starting with a central plaza around which they put up their first buildings, brush ramadas and canvas tents. More substantial adobes and stone buildings soon followed as the town began to grow.

The quiet, sleepy camp was abruptly shaken in 1852, when extremely rich deposits of gold were discovered running practically through the center of town. The camp boomed and changed so drastically, that within a year it hardly resembled its former self. Several saloons and fandangos were among the first new enterprises to appear, closely followed by provision stores, boarding houses, blacksmiths, livery stables, a dry goods store, a school, a church, and several fraternal organizations which included the Sons of Temperance, the Masons, and the Odd Fellows. Due in part to the large number of miners in the area, a post office was established on August 17 of 1854, which is still in service today.

Coyote Creek and its tributaries became quite famous for producing large nuggets during the 1850s, with specimens of eighteen, twenty-five, and twenty-seven pounds being reported. During the height of the camp's production, some $60,000 in gold was shipped monthly from Vallecito. The deposits continued to produce well for a number of years and even in the late 1860s the express office shipped out an average of $20,000 each month. But gold never lasts forever, and Vallecito eventually joined ranks with its contemporaries as the miners moved away, leaving a small population which has kept the town alive to the present day.

Vallecito is located four miles east of Angels Camp via Highway 4.

The Dinklespiel Store was built in 1851 and opened for business the following year. The rugged structure was built of dressed blocks of rhyolite tuff, brought in by freighters over the rough trail from the Altaville quarry. A small adjoining building was added at a later date and served as a saddle shop and later as the Wells Fargo & Co. Express Office. A close look at the front of the building will reveal where the two structures were joined. L. Dinklespiel served as the first Wells Fargo agent in Vallecito.

The Miners’ Bell stands atop a stone monument in front of the little Union Church. The bell was cast in Troy, New York, in 1853 and then installed on a ship which came to California around the Horn. When the ship reached San Francisco, the entire crew caught a severe case of gold fever and deserted for the mines, leaving the ship stranded in the bay. At about this same time, the town of Vallecito was looking for a bell to sound an alarm in case of fire, and to summon folks to church and children to school. Learning of the ship’s circumstances and fittings, a group of men went to San Francisco and purchased the bell. Upon their return it was mounted in a large oak tree near the center of town, where it faithfully served its purpose for many years. The old oak was felled by severe winds on February 16 of 1939, the bell crashing to earth in wild reverberations. In October of that year, the Native Sons of the Golden West mounted the old bell on the stone monument where it remains today.

The Cuneo Ruins, stone and roofless, stand across from the town post office, waiting. Built in 1851 of rhyolite tuff blocks, the building’s two iron doors are still in place, guarding the entrance of this old store where a man known as Cuneo once traded tools and supplies to the Vallecito miners in exchange for the gold dust they found.