The canyon is located in Tioga State Forest and several state parks are on or near it, keeping it largely undeveloped and natural. Along the canyon floor, the Pine Creek Rail Trail, a public path used for biking and hiking, stretches the entire length. More recreation is available at the canyon along the West Rim Trail. The West Rim trail is strictly for hiking and its 30 miles follow the western edge of the canyon.

Pine Creek Gorge is a product of the last ice age. Pine Creek had flowed northeasterly until about 20,000 years ago. The creek was dammed by rocks, soil, and other debris, pushed there by the receding Laurentide Continental Glacier. The dammed creek formed a lake near the present town of Ansonia. The glacial meltwater that filled the lake overflowed the debris dam. This caused a reversal of the flow of Pine Creek. The creek flooded to the south and quickly carved a deep channel on its way south to the West Branch Susquehanna River.

The Pine Creek Gorge National Natural Landmark includes Colton Point and Leonard Harrison State Parks and parts of the Tioga State Forest along 12 miles (19 km) of Pine Creek between Ansonia and Blackwell. This federal program does not provide any extra protection beyond that offered by the land owner. The National Park Service's designation of the gorge as a National Natural Landmark notes that it "contains superlative scenery, geological and ecological value, and is one of the finest examples of a deep gorge in the eastern United States."

The gorge is also protected by the state of Pennsylvania as the 12,163-acre (4,922 ha) Pine Creek Gorge Natural Area, which is the second largest State Natural Area in Pennsylvania. Within this area, 699 acres (283 ha) of Colton Point and Leonard Harrison State Parks are designated a State Park Natural Area. The state Natural Area runs along Pine Creek from Darling Run in the north (just below Ansonia) to Jerry Run in the south (just above Blackwell). It is approximately 12 miles (19 km) long and 2 miles (3.2 km) wide, with state forest roads providing all of the western border and part of the eastern border.

Within the park, Pine Creek and the walls of the gorge "visible from the opposite shoreline" are also protected by the state as a Pennsylvania Scenic River. In 1968 Pine Creek was one of only 27 rivers originally designated as eligible to be included in the National Wild and Scenic River system, and one of only eight specifically mentioned in the law establishing the program. Before Pine Creek could be included in the federal program, the state enacted its State Scenic Rivers Act, then asked that Pine Creek be withdrawn from the national designation. However, there was much local opposition to its inclusion, based at least partly on mistaken fears that protection would involve seizure of private property and restricted access. Eventually this opposition was overcome, but Pennsylvania did not officially include it as one of its own state Scenic and Wild Rivers until November 25, 1992. The state treated Pine Creek as if it were a state scenic river between 1968 and 1992. It protected the creek from dam-building and water withdrawals for power plants, and added public access points to reduce abuse of private property.

Pine Creek Gorge served as a major route of travel for American Indians. They hiked up and down the gorge for thousands of years to a seasonal hunting camp near Ansonia. Ansonia was named for its founder, Anson Phillips, who built a lumber mill that drew the first settlers to the town.

Prior to the arrival of William Penn and his Quaker colonists in 1682, up to 90 percent of what is now Pennsylvania was covered with woods: more than 31,000 square miles (80,000 km2) of Eastern White Pine, Eastern Hemlock, and a mix of hardwoods. The forests near the three original counties, Philadelphia, Bucks, and Chester, were the first to be harvested, as the early settlers used the readily available timber to build homes, barns, and ships, and cleared the land for agriculture. The demand for wood products slowly increased and by the time of the American Revolution the lumber industry had reached the interior and mountainous regions of Pennsylvania. Lumber thus became one of the leading industries in Pennsylvania. Trees were used to furnish fuel to heat homes, tannin for the many tanneries that were spread throughout the state, and wood for construction, furniture, and barrel making. Large areas of forest were harvested by colliers to fire iron furnaces. Rifle stocks and shingles were made from Pennsylvania timber, as were a wide variety of household utensils, and the first Conestoga wagons.

By the early 19th century the demand for lumber reached the Pine Creek Gorge, where the surrounding mountainsides were covered with Eastern White Pine 3 to 6 feet (1 to 2 m) in diameter and 150 feet (46 m) or more tall, Eastern Hemlock 9 feet (2.7 m) in circumference, and huge hardwoods. Each acre (0.40 ha) of these virgin forests produced 100,000 board feet (236 m³) of white pine and 200,000 board feet (472 m³) of hemlock and hardwoods. For comparison, the same area of forest today produces a total of only 5,000 board feet (11.8 m³) on average. According to Steven E. Owlett, environmental lawyer and author, shipbuilders considered pine from Pine Creek the "best timber in the world for making fine ship masts", so it was the first lumber to be harvested on a large scale. The original title to the land that became Colton Point State Park was sold to the Wilhelm Wilkins Company in 1792. Pine Creek was declared a public highway by the Pennsylvania General Assembly on March 16, 1798, and rafts of spars were floated down the creek to the Susquehanna River, then to the Chesapeake Bay and the shipbuilders at Baltimore. The lumbermen would then walk home, following the old Pine Creek Path at the end of their journey. A spar sold for one dollar and three spars up to 90 feet (27 m) long were lashed together to make a ship's mast. The largest spar produced on Pine Creek was 43 inches (110 cm) in diameter 12 feet (3.7 m) above the base, 93 feet (28 m) long, and 33 inches (84 cm) in diameter at the top. By 1840, Tioga County alone produced over 452 such spar rafts with more than 22,000,000 board feet (52,000 m³) of lumber.

As the 19th century progressed, fewer pines were left and more hemlocks and hardwoods were cut and processed locally. By 1810 there were 11 sawmills in the Pine Creek watershed, and by 1840 there were 145, despite a flood in 1832 which wiped out nearly all the mills along the creek. Selective harvesting of pines was replaced by clearcutting of all lumber in a tract. The first lumbering activity to take place close to what is now Leonard Harrison State Park occurred in 1838 when William Dodge and some partners built a settlement at Big Meadows and formed the Pennsylvania Joint Land and Lumber Company. Dodge's company purchased thousands of acres of land in the area, including what is now Colton Point State Park. In 1865 the last pine spar raft floated down the creek, and on March 28, 1871 the General Assembly passed a law allowing splash dam construction and clearing of creeks to allow loose logs to float better. The earliest spring log drives floated up to 20,000,000 board feet (47,000 m³) of logs in Pine Creek at one time. These logs floated to the West Branch Susquehanna River and to sawmills near the Susquehanna Boom at Williamsport. Log drives could be dangerous: just north of the park is Barbour Rock, named for Samuel Barbour, who lost his life on Pine Creek there after breaking up a log jam. Hemlock wood was not widely used until the advent of wire nails, but the bark was used to tan leather. After 1870 the largest tanneries in the world were in the Pine Creek watershed, and required 2,000 pounds (910 kg) of bark to produce 150 pounds (68 kg) of quality sole leather.

In 1879 Henry Colton, who worked for the Williamsport Lumber Company, supervised the cutting of white pine on the land that became the park, which was then owned by Silas Billings. Colton gave his name to the Colton Point overlook on the west rim of the Pine Creek Gorge. Deadman Hollow Road in the park is named for a trapper whose decomposed body was found in his own bear trap there in the early 20th century. Fourmile Run flows through the park: its O'Connor Branch is named for the dead trapper's brothers, who were loggers in the area.