Dilley is located north of Laredo and Catulla on I-35 and Hwy 85 and the Missouri Pacific Railroad lines near the convergence of the Leona and Frio Rivers, in Frio County.
In 1965 Dilley had a peanut-drying plant and a clinic and rest home, as well as a large statue of a watermelon. The population rose steadily during the 1950s and 1960s, to an estimated 2,318 by 1967. At that time Dilley was the county's second largest town and a commercial shipping point for peanuts, watermelons, and cattle.
Oil exploration in the region was encouraged by a horizontal-drilling technology developed in the late 1980s. In 1990 Dilley was chosen as the site for a new 1,000-bed state prison. The population in 1990 was 2,632.