The Northwest Minnesota Foundation began as one of six Minnesota Initiative Funds in 1986. These funds serve six geographic regions, each with its own programs tailored to the particular social and economic needs of each region, by making grants and loans; establishing partnerships with local governments, businesses, and agencies to address problems cooperatively; and promoting regional leadership and employee development through workshops and other training. They work to make Minnesota's rural communities stronger and more prosperous.

Each fund reports to a board of directors from its region. The funds receive support from The McKnight Foundation and, increasingly, from local donors; state, national and local governments; and other foundations.

In the early 1980s, declines in the farming and mining economies were stripping rural communities of people, jobs and hope. At the same time, The McKnight Foundation's assets were growing and it wanted to extend some of those new resources to greater Minnesota.

Believing that the people who live and work in rural Minnesota were best positioned to make philanthropic decisions for themselves and their neighbors, McKnight envisioned a regional strategy that would stimulate local giving and encourage local responsibility for the long-term welfare of each region. Such a strategy helped create the philanthropic tradition in greater Minnesota.

In 1997, the Northwest Minnesota Initiative Fund changed its name to the Northwest Minnesota Foundation to reflect its resolve to become a regional community foundation. This decision answered the growing need for an organization which could assist donors in supporting their communities and interests, while building permanent resources to meet future needs.