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Birmingham was founded on June 1, 1871, by the Elyton Land Company, whose investors included cotton planters, bankers and railroad entrepreneurs. It sold lots near the planned crossing of the Alabama & Chattanooga and South & North Alabama railroads, including land that was part of the Benjamin P. Worthington plantation. The city was chartered by the state legislature on December 19, 1871. The first business at that crossroads was a trading post and country store operated by Marre and Allen. The site of the railroad crossing was notable for its proximity to nearby deposits of iron ore, coal, and limestone – the three main raw materials used in making steel.

Birmingham is the only place where significant amounts of all three minerals can be found in close proximity. From the start the new city was planned as a center of industry. To emphasize this point, the city's founders named it in honor of Birmingham, England, one of the world's premier industrial cities. The growth of the planned city was impeded by an outbreak of cholera and a Wall Street crash in 1873. Soon afterward, however, it began to develop at an explosive rate.

The Tennessee Coal and Iron Company (TCI) became the leading steel producer in the South by 1892. In 1907 U.S. Steel purchased it and became the most important political and economic force in Birmingham. It resisted new industry, however, to keep wage rates down.^:119

In 1910, the towns of Elyton, Ensley and several others were absorbed into Birmingham pursuant to an act of the legislature. From the early 20th century, the city grew so rapidly it earned the sobriquet "The Magic City". The downtown was redeveloped from a low-rise commercial and residential district into a busy grid of neoclassical mid- and high-rise buildings crisscrossed by streetcar lines. Between 1902 and 1912, four large office buildings were constructed at the intersection of 20th Street, the central north–south spine of the city, and 1st Avenue North, which connected the warehouses and industrial facilities along the east–west railroad corridor. This early group of skyscrapers was nicknamed the "Heaviest Corner on Earth".

Birmingham was hit by the 1916 Irondale earthquake (M_L 5.1, intensity VII (Very strong)). A few buildings in the area were slightly damaged. The earthquake was felt as far as Atlanta and neighboring states.

While excluded from the best-paying industrial jobs, African Americans joined the migration of residents from rural areas to the city, drawn by economic opportunity.^{[citation needed]}

The Great Depression of the 1930s struck Birmingham particularly hard, as the sources of capital fueling the city's growth rapidly dried up at the same time farm laborers, driven off the land, made their way to the city in search of work. Hundreds poured into the city, many riding in empty boxcars. "Hobo jungles" were established in Boyles, the Twenty-fourth Street Viaduct, Green Springs Bridge, East Thomas, Pratt City, Carbon Hill and Jasper. In 1934, President Roosevelt called Birmingham the "worst-hit town in the country."New Deal programs put many city residents to work in WPA and CCC programs, and they made important contributions to the city's infrastructure and artistic legacy, including such key improvements as Vulcan's tower and Oak Mountain State Park.

The World War II demand for steel followed by a post-war building boom spurred Birmingham's rapid return to prosperity. Manufacturing diversified beyond the production of raw materials. Major civic institutions such as schools, parks, and museums, also expanded in scope.

Despite the city's growing population and wealth, Birmingham residents were markedly underrepresented in the state legislature. Although the state constitution required redistricting in accordance with changes in the decennial census, the state legislature did not act until the 1970s when the U.S. Supreme Court's landmark decision in Reynolds v. Sims forced it to do so. Birmingham-area voters had sued to force redistricting, and the Court in its ruling cited the principle of "one man, one vote". The Court found that the geographic basis of the state senate, which gave each county one senator, gave undue influence to rural counties. Representatives of rural counties also had disproportionate power in the state House of Representatives and had failed to provide support for infrastructure and other improvements in urban centers such as Birmingham, having little sympathy for urban populations. Prior to this time, the Alabama Legislature (known as the General Assembly until 1901) ran county governments as extensions of the state through their legislative delegations.

In the 1950s and 1960s, Birmingham gained national and international attention as a center of activity during the Civil Rights Movement. Based on their members working in mining and industry, in the 1950s independent Ku Klux Klan (KKK) chapters had ready access to dynamite and other bomb materials. Whites unhappy with social changes in the 1950s committed racially motivated bombings of the houses of black families who moved into new neighborhoods or who were politically active, earning Birmingham the nickname "Bombingham".

Locally, the civil rights movement's activists were led by Fred Shuttlesworth, a fiery preacher who became legendary for his fearlessness in the face of such violence. But he found city officials resistant to making changes for integration or lessening of Jim Crow.

A watershed in the civil rights movement occurred in 1963 when Shuttlesworth requested Martin Luther King Jr. and the Southern Christian Leadership Conference (SCLC), which Shuttlesworth had co-founded, come to Birmingham to help end public segregation.

Together they launched "Project C" (for "Confrontation"), a massive non-violent demonstration against the Jim Crow system. While imprisoned in April 1963 for having taken part in a nonviolent protest, Dr. King wrote the now famous "Letter from Birmingham Jail", a defining treatise in his cause against segregation. During April and May, daily sit-ins and mass marches organized and led by movement leader James Bevel were met with police repression, tear gas, attack dogs, fire hoses, and arrests. More than 3,000 people were arrested during these protests, many of them children. King and Bevel filled the jails with students to keep the demonstrations going.

By September the SCLC and city were negotiating to end an economic boycott and desegregate stores and other facilities. On a Sunday in September 1963, a bomb went off at the 16th Street Baptist Church, killing four black girls. The activists' protests and national outrage about the police and KKK violence contributed to the ultimate desegregation of public accommodations in Birmingham and also passage of the Civil Rights Act of 1964.

In 1998, the Birmingham Pledge, written by local attorney James Rotch, was introduced at the Martin Luther King Unity Breakfast. As a grassroots community commitment to combating racism and prejudice, it has since been used for programs in all fifty states and in more than twenty countries.

In 2020, after protests against the killing of George Floyd, a Confederate memorial was removed from Linn Park, the city's central park.

In the 1970s, urban renewal efforts focused around the development of the University of Alabama at Birmingham, which has become a major medical and research center. In 1971 Birmingham celebrated its centennial with a round of public-works improvements, including the upgrading of Vulcan Park and the construction of a major downtown convention center containing a 2,500-seat symphony hall, theater, 19,000-seat arena, and exhibition halls. Birmingham's banking institutions enjoyed considerable growth as well, and new skyscrapers were constructed in the city center for the first time since the 1920s. These projects helped the city's economy to diversify, but did not prevent the exodus of many of the city's residents to independent suburbs. Suburbanization was a national trend. In 1979 Birmingham elected Dr. Richard Arrington Jr. as its first African-American mayor.

The population inside Birmingham's city limits has fallen over the past few decades, due in large part to "white flight" from the city to the surrounding suburbs and loss of jobs following industrial and railroad restructuring. The city's formerly most populous ethnic group, non-Hispanic white, has declined from 57.4 percent in 1970 to 21.1 percent in 2010. From 340,887 in 1960, the city's population had decreased to 242,820 in 2000, a loss of about 29 percent. By 2010, Birmingham's population had reached 212,237, its lowest since the mid-1920s, but the city has since stopped losing residents. That same period saw a corresponding rise in the populations of the suburban communities of Hoover, Vestavia Hills, Alabaster, Trussville, and Gardendale. All of these cities were incorporated after 1947, and have since seen their populations swell with former Birmingham residents. For instance, Hoover was incorporated in 1967; it has since grown to become the sixth-largest city in the state.

New resources have been dedicated in reconstructing the downtown area into a 24-hour mixed-use district. The market for downtown lofts and condominiums has increased, while restaurant, retail and cultural options have expanded. In 2006, the visitors bureau selected "the diverse city" as a new tag line for the city. In 2011, the Highland Park neighborhood of Birmingham was named as a 2011 America's Great Place by the American Planning Association. In January 2015, the International World Game Executive Committee selected Birmingham as the host for the 2021 World Games.

Recent developments have attracted national media. The New York Times has praised the city's food scene since 2006.The Washington Post has also featured stories about the city's cuisine and neighborhoods. Referring to the city's civil rights history, Alice Short of the Los Angeles Times wrote, "Anyone who cares about U.S. history should plan a trip here."

Based on the 2000 census, there were 242,820 people, 98,782 households, and 59,269 families residing in the city. The population density was 1,619.7 people per square mile (625.4/km²). There were 111,927 housing units at an average density of 746.6 per square mile (288.3/km²). The racial makeup of the city was 62.46% Black, 35.07% White, 0.17% Native American, 0.80% Asian, 0.04% Pacific Islander, 0.62% from other races, and 0.83% from two or more races. 1.55% of the population were Hispanic or Latino of any race.

There were 98,782 households, of which 27.7% had children under the age of 18 living with them, 31.1% were married couples living together, 24.6% had a female householder with no husband present, and 40.0% were non-families. 34.4% of all households were made up of individuals, and 10.4% had someone living alone who was 65 years of age or older.

The city's population is spread out, with 25.0% under the age of 18, 11.1% from 18 to 24, 30.0% from 25 to 44, 20.4% from 45 to 64, and 13.5% who were 65 years of age or older. The median age was 34 years. For every 100 females, there were 85.7 males.

The city's median household income was $31,898, and the median family income was $38,776. Males had a median income of $36,031 versus $30,367 for females. The city's per capita income was $19,962. About 22.5% of families and 27.3% of the population were below the poverty line, including 41.9% of those under the age of 18 and 18.3% of those age 65 or over.

According to the 2010 census:

Birmingham has hundreds of Christian churches, five synagogues, three mosques, and two Hindu temples. The Association of Statisticians of American Religious Bodies published data showing that in 2010, among metro areas with greater than one million population, Birmingham had the second highest ratio of Christians, and the greatest ratio of Protestant adherents, in the U.S.

The Southern Baptist Convention has 673 congregations and 336,000 members in the Birmingham metro area. The United Methodists have 196 congregations and 66,759 members. The headquarters of the Presbyterian Church in America was in Birmingham until the early 1980s; the PCA has more than 30 congregations and almost 15,000 members in the Birmingham metro area, with megachurches such as Briarwood Presbyterian Church. The National Baptist Convention has 126 congregations and 69,800 members.

The city is home to the Roman Catholic Diocese of Birmingham, covering 39 counties and comprising 75 parishes and missions as well as seven Catholic high schools and nineteen elementary schools. There are also two Eastern Catholic parishes in Birmingham. The Catholic television network EWTN is headquartered in metropolitan Birmingham. There are three Eastern Orthodox churches in the metro area, representing the Greek, Russian, and American Orthodox churches. The mother church of the Episcopal Diocese of Alabama, the Cathedral Church of the Advent is in downtown Birmingham. There is also a Unitarian Universalist church.

With a crime rate of 85 per one thousand residents, Birmingham has one of the highest crime rates in the United States, ranked 20th, according to a study in 2017 for cities with a population over 25,000. Neighboring Bessemer also ranks high at seventh. Violent crime in Birmingham increased by 10% from 2014 to 2016. As the third most violent city in the country, the city's murder, robbery, and aggravated assault rates are each among the top five of all major U.S. cities. As in many high crime areas, poverty is relatively common in Birmingham. Citywide, 31% of residents live in poverty, a higher poverty rate than all but a dozen other large U.S. cities.

Birmingham was ranked 425th in crime rate in the U.S. for 2012 by CQ Press. The Birmingham-Hoover Metropolitan Statistical Area (MSA) was ranked as having the 35th highest crime rate in the U.S., out of 347 MSAs ranked in 2011 by CQ Press. The Birmingham metro area crime rate is in line with other southern MSAs such as Jacksonville and Charlotte.U.S. News & World Report ranked Birmingham as the third most dangerous city in the nation for 2011 (only Atlanta and St. Louis were ranked higher). The A&E Network series The First 48 has filmed episodes with some of the city's homicide detectives.