The Karl E. Mundt Foundation was formed in 1963 by friends of Senator Mundt in South Dakota. The concept rapidly gained support among leaders in the nation's capitol and across the nation. There were two reasons why the Foundations was formed. The first was to construct and operate facilities that could hold Senator Mundt’s memorabilia and archives. The second was to help fund programs for agriculture, free enterprise, humanities, forensics, history, and education.

In 1966, the South Dakota Board of Regents, Dakota State College and the Foundation Board of Directors agreed that Dakota State College's new library would be known as the Karl E. Mundt Library with the Foundation to be housed in the lower level of the building. The Foundation area was constructed and furnished by private donations. The building was dedicated June 3, 1969 by President Richard M. Nixon.

The Foundation awards prizes for essays and oratorical contests, sponsors seminars and public lectures, and helps support many South Dakota projects such as the Karl E. Mundt Debate Tournament and Karl E. Mundt Dakota Invitational Oral Interpretation Contest. The foundation also provides student scholarships and the Foundation area is used for campus and community activities.