In the summer of 1777, the Continental Army's quartermaster general, Thomas Mifflin, decided to station a portion of the Continental Army's supplies in buildings around the forges because the region had a variety of structures and was a secluded location surrounded by two hills. On October 29, 1777, Washington first presented his generals with the question of where to quarter the Continental Army that winter. Pennsylvania state legislators and the Second Continental Congress expected the Continental Army to select an encampment site that could protect the countryside around the revolutionary capital of Philadelphia. Following Washington's defeat in the Battle of Brandywine and unable to defend Philadelphia, Washington led his 12,000-man army into winter quarters at Valley Forge, located approximately 18 miles northwest of the city. The encampment was primarily situated along the high, flat ground east of Mount Joy and south of the Schuylkill River.

The Valley Forge encampment became the Continental Army's first large-scale construction of living quarters. While no accurate account exists for the number of log huts built, experts estimate a range between 1,300 and 1,600 structures. At Valley Forge, the Continental Army struggled to manage a disastrous supply crisis while simultaneously retraining and reorganizing their units in an effort to mount successful counterattacks against the British. During the encampment at Valley Forge, an estimated 1,700 to 2,000 soldiers died from disease, possibly exacerbated by malnutrition.

Baron Friedrich von Steuben, a Prussian drill master who had recently arrived from Europe, instituted a rigorous training program for the troops. He drilled the soldiers, improving their battle and formation techniques. Under Steuben's leadership, the Continentals practiced volley fire, improved their maneuverability, standardized their march paces, exercised skirmishing operations, and drilled bayonet proficiency. These new efforts to train and discipline the army also improved morale among the soldiers.