The genus was named in 1993 by Kevin Padian, Armand de Ricqlès, and Jack Horner, again published by the same authors in 1995 and fully described in 2002.
The type species is Montanazhdarcho minor. The genus name refers to Montana and to the related species Azhdarcho. The specific name means "the smaller one" in Latin, a reference to the relatively small size in comparison to closely related forms.
The holotype, MOR 691 (Museum of the Rockies), was found by Robert W. Harmon in Glacier County, in the territory of the Blackfoot, in sandstone of the Upper Two Medicine Formation, a layer about 74 million years old. The fossil is largely uncompressed and that of an adult exemplar, as established by a study of the bone by de Ricqlès. It consists of a partial left wing, lacking the outer three wing finger phalanges, a complete shoulder girdle, a crushed cervical vertebra and two fragments of the symphysis of the mandible. The jaws were edentulous, i.e.: they lacked teeth.
Montanazhdarcho was by the authors assigned to the Azhdarchidae, mainly based on the elongated form of the neck vertebra. Compared to other azhdarchids, it was small; the fragments of humerus, radius, and carpal suggest an animal with a 2.5 meter wingspan (eight feet). Its ulna was longer than the wing metacarpal, which is atypical for azhdarchids.