Harry Molenaar, a Hammond-based Harley-Davidson dealer, developed the facility beginning in 1947. Motorcycle competition preceded the oval's official opening, with the first motorcycle races staged in 1945; the first stock car events followed in 1948. The original racing surface was dirt, and the track competed for regional audiences through the late 1950s in that configuration.
Before the 1962 season the surface was paved with asphalt, a transformation that reshaped the competitive character of the venue. On May 13, 1962, the first IMCA sprint car race on the new pavement was held, and Johnny Rutherford won the inaugural event. The paving allowed Illiana to attract USAC national championship events that required more consistent surface conditions than a dirt oval could provide.
In 1962 Molenaar established the Tony Bettenhausen Memorial 100, a USAC event named in honor of Tony Bettenhausen, a well-known Illinois-born Indy car driver who had been fatally injured at Indianapolis Motor Speedway the previous year. Troy Ruttman won the inaugural Bettenhausen Memorial in 1962. The race became a signature event on the Illiana calendar and anchored the track's status as a championship-level venue in the Chicago metropolitan area.
Through the 1960s and into the 1970s Illiana hosted a regular programme of USAC national championship competition drawing the leading drivers of American open-wheel and stock car racing. Paul Goldsmith was among the frequent winners in USAC stock car events at the facility. The track's half-mile paved oval format placed it within the network of traditional Midwest championship ovals that formed the backbone of American open-wheel racing outside of Indianapolis. Grandstand capacity stood at 7,000.
Beyond its championship programme, Illiana operated as a weekly regional oval. Bobby Wawak, the 1974 Late Model champion at the track, went on to race in NASCAR for many years. Larry Schuler, the 1976 Late Model champion, was recognised as the winningest driver in the nation that season. Bobby Dotter, the 1981 Late Model champion, later won a race in the NASCAR Busch Series. Brett Sontag was named 2004 ASA National Tour Rookie of the Year after competing at Illiana.
Mike Mikuly purchased the speedway in 1999 and undertook a repaving project in 2000, also installing cement walls to replace older guard rails. New divisions were added in subsequent years: a Limited Late Model division joined in 2003, Pure Stock four-cylinder cars in 2004, and Legend cars in 2007. The outright lap record of 15.994 seconds was set by Brian Gerster in a HOSS sprint car event in 2007.
In March 2016 it was announced that Illiana Motor Speedway would not open for the season. On June 24, 2016, the town of Schererville confirmed it had purchased the property for $1.67 million and would proceed with demolition.
Illiana occupied a distinctive position in Midwest short-track history as the only half-mile paved oval in the Chicago metropolitan area for most of its operational life. Its combination of USAC championship events, the Tony Bettenhausen Memorial, weekly regional competition, and a succession of drivers who progressed to higher levels gave the facility an influence disproportionate to its modest size.