In 1919, Congress passed the 18th Amendment which was referred to as Prohibition. Prohibition made the manufacture, distribution, transportation and sale of alcohol beverages in the United States illegal.

Prohibition was in effect in this country for just over 14 years. The prohibition era was marked by the rise of bathtub gin, illegal stills and the growth of a black market that made fortunes manufacturing and selling alcoholic beverages illegally. In February 1933, Prohibition was repealed. In December of that year, the 21st amendment was ratified officially ending prohibition.

In December 1933, Minnesota passed the Liquor Control Act. The act was established to regulate the manufacture, distribution, retail sale and consumption of alcoholic beverages in the state of Minnesota.

The Liquor Control Department was created to enforce the Liquor Control Act. In January 1934, David Arundel was sworn in as Minnesota's first commissioner of the Liquor Control Department. The department had 12 agents. During this time, Minnesota still had many dry counties. Bootlegging, the transportation and distribution of alcohol beverages in the dry areas, was an enforcement concern.

In 1957, Minnesota passed the city option. This allowed individual cities to decide if they wanted liquor or not. The result was an expansion of the areas where the manufacture, distribution and retail sale of alcohol beverages was legal.

In 1976, Minnesota government was restructured, resulting in the Liquor Control Department being merged into the Department of Public Safety. The duties of Liquor Control commissioner were given to the commissioner of Public Safety. Joseph Novak, the existing Liquor Control commissioner, was given the new title and duties of the director of the Liquor Control Division.

In 1985, the Liquor Control Act, MN Statute 340, was recodified by the Minnesota Legislature, creating the laws in force today.

In 1992, the division was modernized through the introduction of improved communications with the alcohol beverage industry by keeping them aware of statutory and policy changes. Two examples are through the use of industry circulars and a paperback version of the liquor laws and rules handed out by agents during routine inspections.

In October 1996, the Liquor Control Division was merged with the Gambling Enforcement Division to create he Division of Alcohol and Gambling Enforcement.