The area around Idaho Falls was first sparsely settled by cattle and sheep ranchers. No significant development took place until 1864, when a man named Harry Rickets built and operated a ferry on the Snake River at 43°36.112′N 112°3.528′W / 43.601867°N 112.058800°W / 43.601867; -112.058800. The ferry served a new tide of westward migration and travel on the Montana Trail following the Bear River Massacre of Shoshone Indians in 1863.

The present-day site of Idaho Falls became a permanent settlement when freighter Matt Taylor built a timber-frame toll bridge across a narrow black basaltic gorge of the river 7 miles (11 km) downstream from the ferry. The bridge improved travel for settlers moving north and west, and for miners, freighters, and others seeking riches in the gold fields of Idaho and Montana—especially the boom towns of Bannack and Virginia City.

By the end of 1865, a private bank, small hotel, livery stable, eating house, post office, and stage station had sprung up near the bridge. The settlement was initially known as Taylor's Crossing, but postmarks indicate that by 1866, the emerging town had become known as Eagle Rock. The name was derived from an isolated basalt island in the river near the ferry, where approximately twenty eagles nested.

In 1874, water rights were established on nearby Willow Creek and the first grain was harvested. Settlement was sparse, and consisted of only a couple of families and small irrigation ditches. The first child of European descent was born at Eagle Rock in 1874.

Soon, the Utah and Northern Railway (U&NR) was built, stretching north from Utah through Eagle Rock and crossing the Snake River at the same narrow gorge as Taylor's bridge. The railway would eventually connect to the large new copper mines at Butte, Montana. The U&NR had the backing of robber baron Jay Gould, as Union Pacific Railroad had purchased it a few years prior. Grading crews reached Eagle Rock in late 1878, and by early 1879, a wild camp-town with dozens of tents and shanties had moved to Eagle Rock with a collection of saloons, dance halls, and gambling halls. The railroad company had 16 locomotives and 300 train cars working between Logan, Utah and the once-quiet stage stop. A new iron railroad bridge was fabricated in Athens, Pennsylvania at a cost of $30,000 and shipped by rail to the site, where it was erected in April and May 1879. The bridge was 800 feet (240 m) long and had two spans, with an island in the center. The camp-town moved on, but Eagle Rock now had regular train service and several U&NR buildings, shops, and facilities which expanded and transformed the town.

As soon as the railroad came through, settlers began homesteading the upper Snake River Valley in earnest. The first new settlers carved out homesteads to the north at Egin (near present-day Parker) and at Pooles Island (near present-day Menan). The Utah & Northern Railway provided easy access, especially to homesteaders from Utah, who soon populated much of the area surrounding Eagle Rock. Some of these men had initially worked building the railroad, then later returned with their families to stake out new farms. These Utah families brought irrigation know-how developed in Utah's Great Basin settlements. Through their and others' canal systems, water from the Snake River made the Upper Snake River Valley into one of the most successful irrigation projects in the Mountain West. Large-scale settlement ensued and within a decade, there appeared roads, bridges, and dams, which brought most of the Upper Snake River Valley under cultivation.

Then, in 1887, following the construction of the Oregon Short Line and a railroad workers' strike in Eagle Rock, most of the railroad facilities were moved to Pocatello, where the new line branched off the U&NR. This caused a sharp and immediate drop in population, which nearly killed the town. In 1891, in an effort to attract farmers wary of eagles and rocks,^{[citation needed]}marketers convinced town leaders to change the name to Idaho Falls in reference to the rapids below the bridge. Some years later, the construction of a retaining wall for a hydroelectric power plant transformed the rapids into waterfalls. On June 22, 1895, the world's then-largest irrigation canal, the Great Feeder (located 5 miles northeast of Ririe), began diverting water from the Snake River, helping to convert tens of thousands of more acres of desert into green farmland. The area grew sugar beets, potatoes, peas, grains, and alfalfa, and became one of the most productive agricultural regions of the United States. The city once again began to flourish, growing continuously into the 20th century.

In 1949, the Atomic Energy Commission opened the National Reactor Testing Station (NRTS) in the desert west of Idaho Falls. On Dec. 20, 1951, a nuclear reactor there produced useful electricity for the first time in history. There have been more than 50 unique reactors built at the facility for testing- only three remain active.^{[citation needed]}

On January 3, 1961, NRTS became the scene of the only fatal nuclear reactor incident in U.S. history. The event occurred at an experimental U.S. Army plant known as the Argonne Low-Power Reactor, which the Army called the Stationary Low-Power Reactor Number One (SL-1). Due to poor design and maintenance procedures, a single control rod was manually pulled out too far from the reactor, causing the reactor to become prompt critical, leading to a destructive power excursion. Three trained military men had been working inside the reactor room when a mistake was made while reattaching a control rod to its motor assembly. With the central control rod nearly fully extended, the nuclear reactor rated at 3 MW rapidly increased power to 20 GW. This rapidly boiled the water inside the core. As the steam expanded, a pressure wave of water forcefully struck the top of the reactor vessel, upon which two of the men stood. The explosion was so severe that the reactor vessel was propelled nine feet into the air, striking the ceiling before settling back into its original position. One man was impaled by a shield plug and lodged into the ceiling, where he died instantly. The other men died from their injuries within hours. The three men were buried in lead coffins, and that entire section of the site was buried. The core meltdown caused no damage to the area, although some radioactive nuclear fission products were released into the atmosphere.

The site has since developed into the Idaho National Laboratory (INL), a national laboratory operated by the United States Department of Energy. INL and its contractors are a major economic engine for the Idaho Falls area, employing more than 8,000 people between the desert site and its research and education campus in Idaho Falls. Among other projects, INL operates and manages the world-famous Advanced Test Reactor (ATR).

As of the census of 2010, there were 56,813 people, 21,203 households, and 14,510 families residing in the city. The population density was 2,542.0 inhabitants per square mile (981.5/km²). There were 22,977 housing units at an average density of 1,028.1 per square mile (397.0/km²). The racial makeup of the city was 89.3% White, 0.7% African American, 1.0% Native American, 1.0% Asian, 0.1% Pacific Islander, 5.6% from other races, and 2.3% from two or more races. Hispanic or Latino of any race were 12.9% of the population.

There were 21,203 households, of which 37.1% had children under the age of 18 living with them, 52.4% were married couples living together, 11.3% had a female householder with no husband present, 4.7% had a male householder with no wife present, and 31.6% were non-families. 26.5% of all households were made up of individuals, and 9.7% had someone living alone who was 65 years of age or older. The average household size was 2.63 and the average family size was 3.20.

The median age in the city was 32.2 years. 29.3% of residents were under the age of 18; 9.2% were between the ages of 18 and 24; 26.5% were from 25 to 44; 23.4% were from 45 to 64; and 11.8% were 65 years of age or older. The gender makeup of the city was 49.5% male and 50.5% female.

The 2000 census reported there were 50,730 people, 18,793 households, and 13,173 families residing in the city, though MSN real estate reports an area population of 110,220. The population density was 2,972.2 people per square mile (1,147.4/km²). There were 19,771 housing units at an average density of 1,158.4 per square mile (447.2/km²). The racial makeup of the city was 92.09% White, 0.62% African American, 0.76% Native American, 1.05% Asian, 0.06% Pacific Islander, 3.81% from other races, and 1.61% from two or more races. Hispanic or Latino of any race were 7.18% of the population.

There were 18,793 households, out of which 37.5% had children under the age of 18 living with them, 56.5% were married couples living together, 10.2% had a female householder with no husband present, and 29.9% were non-families. 25.3% of all households were made up of individuals, and 9.1% had someone living alone who was 65 years of age or older. The average household size was 2.65 and the average family size was 3.21.

In the city, the population was spread out, with 30.3% under the age of 18, 10.1% from 18 to 24, 27.6% from 25 to 44, 20.9% from 45 to 64, and 11.1% who were 65 years of age or older. The median age was 32 years. For every 100 females, there were 97.9 males. For every 100 females age 18 and over, there were 94.8 males.

The median income for a household in the city was $40,512, and the median income for a family was $47,431. Males had a median income of $39,082 versus $23,001 for females. The per capita income for the city was $18,857. About 7.8% of families and 10.9% of the population were below the poverty line, including 12.7% of those under age 18 and 6.3% of those age 65 or over.

The top five ethnic groups in Idaho Falls are: