A small circulating library was first organized in the Benton County community of Keystone in the winter of 1914, but was quickly discontinued as usage dropped over the summer months. Several short-lived libraries existed before the current library was established in the basement of the Legion Hall in 1958.

The local Literary Club began an annual bazaar to support the library, and in 1967, the town council began to provide monetary support to the library organization. In 1975, residents Oscar and Alvena Schroeder purchased a cement block building on Main Street that had previously been used as a Laundromat.  They donated the building to the town for use as a library. They also funded a large rear addition to the library in 1981; the library is now named in their honor.