North Hollywood was once part of the vast landholdings of the Mission San Fernando Rey de España, which was confiscated by the government during the Mexican period of rule.

A group of investors assembled as the San Fernando Farm Homestead Association purchased the southern half of the Rancho Ex-Mission San Fernando.^[when?] The leading investor was Isaac Lankershim, a Northern California stockman and grain farmer, who was impressed by the Valley's wild oats and proposed to raise sheep on the property. In 1873, Isaac Lankershim's son and future son-in-law, James Boon Lankershim and Isaac Newton Van Nuys, moved to the San Fernando Valley and took over management of the property. Van Nuys thought the property could profitably grow wheat using the dryland farming technique developed on the Great Plains and leased land from the Association to test his theories. In time, the Lankershim property, under its third name, the Los Angeles Farming and Milling Company, would become the world's largest wheat-growing empire.

In October 1887, J.B. Lankershim and eight other developers organized the Lankershim Ranch Land and Water Company, purchasing 12,000 acres (49 km²) north of the Cahuenga Pass from the Lankershim Farming and Milling Company. Lankershim established a townsite which the residents named Toluca along the old road from Cahuenga Pass to San Fernando. On April 1, 1888, they offered ready-made small farms for sale, already planted with deep-rooted deciduous fruit and nut trees—mostly peaches, pears, apricots, and walnuts—that could survive the rainless summers of the Valley by relying on the high water table along the Tujunga Wash rather than surface irrigation.

The land boom of the 1880s went bust by the 1890s, but despite another brutal drought cycle in the late 1890s, the fruit and nut farmers remained solvent. The Toluca Fruit Growers Association was formed in 1894. The next year the Southern Pacific opened a branch line slanting northwest across the Valley to Chatsworth. The Chatsworth Limited made one freight stop a day at Toluca, though the depot bore the new name of Lankershim. With the post office across the street being called Toluca, controversy over the town's name continued, and the local ranchers used to quip, "Ship the merchandise to Lankershim, but bill it to Toluca." In 1896, under pressure from Lankershim, the post office at Toluca was renamed "Lankershim" after his father, although the new name of the town would not be officially recognized until 1905.

By 1903, the area was known as "The Home of the Peach". In 1912, the area's major employer, the Bonner Fruit Company, was canning over a million tons of peaches, apricots, and other fruits. When the Los Angeles Aqueduct opened in 1913, Valley farmers offered to buy the surplus water, but the federal legislation that enabled the construction of the aqueduct prohibited Los Angeles from selling the water outside of the city limits.

At first, resistance to the real-estate development and downtown business interests of Los Angeles remained strong enough to keep the small farmers unified in opposition to annexation. However, the fruit packing company interests were taken over by the Los Angeles interests. The two conspired to decrease prices and mitigate the farmers' profit margins, making their continued existence tenuous. When droughts hit the valley again, rather than face foreclosure, the most vulnerable farmers agreed to mortgage their holdings to the fruit packing company and banks in Los Angeles for the immediate future and vote on annexation.^{[citation needed]}

West Lankershim (more or less today's Valley Village) agreed to be annexed to the City of Los Angeles in 1919. Lankershim proper joined in 1923. Much of the promised water delivery was withheld, and many of the ranchers one by one had their holding foreclosed or transferred to the packing companies. In turn, these were bought up by the real-estate developers and by the late 1920s a massive effort was underway to market the area to prospective home owners throughout the country. As part of this effort, in 1927, in an effort to capitalize on the glamour and proximity of Hollywood, Lankershim was renamed "North Hollywood". The result was a massive development of housing which transformed the area into a suburban development of Los Angeles.

In the late 1940s and 1950s the area saw the first department-store-anchored, auto-oriented shopping center in the Valley: Valley Plaza, covering both a development at Laurel Canyon at Victory boulevards but also a loose collection of other retail stores south along Laurel Canyon to Oxnard, including a branch of the May Co., the second-largest suburban department store branch in the U.S. at the time. In the mid-1950s Valley Plaza claimed to be the largest shopping center on the West Coast of the United States and the third-largest in the country. The May Co. at the south end of the Valley Plaza shopping district built its own attached, enclosed mall, Laurel Plaza, opening in 1968. The last department of Valley Plaza's anchors, Sears, closed in 2019 as department store-anchored shopping centers lost favor. As of 2020, much of the Valley Plaza retail space is either empty, portion is now a middle school, and the Laurel Plaza site is under construction to become NOHO West, a mixed-use development including retail.

Lankershim Blvd. around Magnolia Blvd. was the heart of the town of Lankershim and of North Hollywood and until the mid-1950s boasted the largest concentration of retail stores, banks, restaurants, and entertainment. In 1953, for example, the shopping strip included three full-line department stores: J.C. Penney at 5261 Lankershim, Yeakel & Goss department store at 5272, and the upscale single-location Rathbun's department store at nos. 5307–15. There were also branches of the large Harris & Frank clothing chain at 5236 Lankershim, J. J. Newberry five and dime at 5321, and Safeway at 5356. But nearby Valley Plaza shopping center, designed for accessibility by car with plenty of free parking, opened in 1951 and kept growing until by 1956 it claimed to be the third-largest shopping center in the country. It was difficult for the Lankershim retail district to compete and by 1980, most stores had closed including iconic Rathbun's.

By the late 1950s, many of the original owners were aging, and their children were moving to other areas. School integration in the subsequent years, blockbusting, and subsequent ethnic turmoil encouraged many remaining families to move out, who in turn were replaced with black and Hispanic families moving from the downtown areas. By the 1990s, the demographic changes had almost completely transformed the region.

The North Hollywood shootout occurred in 1997, leaving 12 Los Angeles Police Department officers and eight civilians injured and the two armed robbers dead.

The opening of North Hollywood station in 2000, establishment and success of the NoHo Arts District in the old "downtown", and repurposing of disused lots such as Laurel Plaza into NOHO West, has revitalized the heart of North Hollywood.

Since 2000, the community has been developing and undergoing many changes, thanks in large part to the formation of the 743-acre North Hollywood Development District and the subsequent NoHo Commons projects.

In 2015, Lankershim Boulevard in North Hollywood was part of the first San Fernando Valley CicLAvia, an event sponsored by the Los Angeles County Metropolitan Transportation Authority in which major roads are temporarily closed to motorized vehicle traffic and used for recreational human-powered transport.

The 2000 U.S. census counted 77,848 residents in the 5.87-square-mile North Hollywood neighborhood—or 13,264 people per square mile, about an average population density for the city but among the highest for the county. In 2008, the city estimated that the population had increased to 87,241. In 2000 the median age for residents was 30, considered an average age for city and county neighborhoods; the percentage of residents aged 19 to 34 was among the county's highest.

The neighborhood was considered "moderately diverse" ethnically within Los Angeles. The breakdown was 57.7% Latino, 27% Non-Hispanic White, 5.7% Asian, 5.6% black, and 4% from other groups. Foreign-born residents made up 46.4% of residents, a high percentage for Los Angeles; Mexico (43.2%) and El Salvador (16%) were the most common places of birth for this portion of the population. The percentages of never-married men and never-married women were among the county's highest.

The median yearly household income in 2008 dollars was $42,791, considered average for the city but low for the county. The percentages of households that earned $40,000 or less were high for the county. Renters occupied 75.4% of the housing stock, and house- or apartment-owners held 24.6%.