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In 1888, the community was incorporated as Niles Centre. About 1910, the spelling was Americanized to "Niles Center". However, the name caused postal confusion with the neighboring village of Niles. A village-renaming campaign began in the 1930s. In a referendum on November 15, 1940, residents chose the Native American name "Skokie" over the name "Devonshire."

During the real estate boom of the 1920s, large parcels were subdivided; many two- and three-flat apartment buildings were built, with the "Chicago"-style bungalow a dominant architectural specimen. Large-scale development ended as a result of the Great Crash of 1929 and consequent Great Depression. It was not until the 1940s and the 1950s, when parents of the baby boom generation moved their families out of Chicago, that Skokie's housing development began again. Consequently, the village developed commercially, an example being the Old Orchard Shopping Center, currently named Westfield Old Orchard.

During the night of November 27–28, 1934, after a gunfight in nearby Barrington that left two FBI agents dead, two accomplices of notorious 25-year-old bank-robber Baby Face Nelson (Lester Gillis) dumped his bullet-riddled body in a ditch along Niles Center Road adjoining the St. Peter Catholic Cemetery, a block north of Oakton Street in the town.

The first African-American family to move to Skokie arrived in 1961, and open-housing activists helped to integrate the suburb subsequently.

The name of the town was changed from "Niles Center" to "Skokie" by referendum in 1940. "Skokie" had previously been used as the name for the marshland on which much of the town was built; the term "Skokie marsh" was being used by local botanists, notably Henry Chandler Cowles, as early as 1901. Maps long named the Skokie marsh as Chewab Skokie, a probable derivation from Kitchi-wap choku, a Potawatomi term meaning "great marsh".

Virgil Vogel's Indian Place Names in Illinois (Illinois State Historical Society, 1963) records the name Skokie as:

In Native Placenames of the United States (U. of Oklahoma Pr, 2004), William Bright lists Vogel's Potawatomi derivation first, but adds reference to the Ojibwa term miishkooki ("marsh") recorded in the Eastern Ojibwa-Chippewa-Ottawa Dictionary (Mouton, 1985), by Richard A. Rhodes.

The 1940 change of name may also have been influenced by James Foster Porter, a Chicago native, who had explored the "Skoki Valley" in Banff National Park in Canada in 1911 and became captivated by the name. Porter supported the name "Skokie" in the referendum when he returned to America.

Twice in its history, Skokie has been the focal point of cases before the United States Supreme Court. National Socialist Party of America v. Village of Skokie, 432 U.S. 43 (1977), involved a First Amendment issue. Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001) touched upon the Commerce Clause.

In 1977 and 1978, Illinois neo-Nazis of the National Socialist Party of America (NSPA) attempted to hold a march in Skokie, far from their headquarters on Chicago's south side. Originally, the neo-Nazis had planned a political rally in Marquette Park in Chicago. The park is located in what was then a predominantly all-white neighborhood, similar to the situation in 1966, when a crowd of 4,000 Marquette Park residents gathered to watch Martin Luther King Jr. lead a march, some waving Confederate flags or throwing bottles, bricks and rocks at the protesters; King was knocked to his knees when struck by a rock. However, the Chicago authorities thwarted the NSPA's plans.

Seeking another free-speech political venue, the NSPA group chose to march on Skokie. Given the many Holocaust survivors living in Skokie, the village's government thought the Nazi march would be disruptive, and refused the NSPA permission to hold the event. The NSPA appealed that decision, and the American Civil Liberties Union interceded on their behalf, in National Socialist Party of America v. Village of Skokie. An Illinois appeals court raised the injunction issued by a Cook County Circuit Court judge, ruling that the presence of the swastika, the Nazi emblem, would constitute deliberate provocation of the people of Skokie. However, the Court also ruled that Skokie's attorneys had failed to prove that either the Nazi uniform or their printed materials, which it was alleged that the Nazis intended to distribute, would incite violence.

Moreover, because Chicago subsequently lifted its Marquette Park political demonstration ban, the NSPA ultimately held its rally in Chicago. The attempted Illinois Nazi march on Skokie was dramatized in the television movie, Skokie, in 1981. It was satirized in The Blues Brothers movie in 1980.

In 2001, Skokie's decision to use an isolated wetland as a solid waste disposal site resulted in a lawsuit. Ultimately, the case went all the way to the United States Supreme Court, and resulted in an overturn of the federal migratory bird rule. See Solid Waste Agency of Northern Cook Cty. v. Army Corps of Engineers for more information.

Per the census of 2000, the Village of Skokie was composed of 63,348 people who formed in 23,223 households containing 17,045 families. The village's population density was 6,308.70 people per square mile (2,436.1/km²) living in 23,702 housing units (average population density: 2,360.4/square mile [911.5/km²]). The village's racial composition was: 65.6% White, 4.51% African American, 0.17% Native American, 21.28% Asian, 0.03% Pacific Islander, 1.86% from other races, 3.23% from two or more races. The Hispanic and Latino population, of any race, made up 5.71% of the village.

The 23,223 households comprise: 32.2% with minority-age children (younger than 18 years), 60.5% were cohabiting married couples, 9.9% of households were headed by a woman (with no husband present), and 26.6% were non-family cohabitants, 23.6% were single-person households, and 13.6% included an elder person (65 years of age or older). The average Skokie household size was 2.68 persons, and the average household family size was 3.20 persons.

Chronologically, Skokie's age population comprises: 23.0% of minority age (younger than 18 years); 7.0% aged from 18 to 24 years; 25.0% aged from 25 to 44, 25.5% aged from 45 to 64, and 19.6% aged 65 years and older. The median Villager's age is 42 years; for every 100 women younger than 18 years, there were 90.1 men; for every 100 women age 18 and older, there were 85.2 men.

Financially, Skokie's median household income was $57,375; the median family income was $68,253; a man's median income was $44,869; a woman's median income was $33,051. The per capita income is $27,136; 4.2% of families and 5.4% of the population are below the poverty line income, including 5.9% of children under 18 and 5.3% of elders aged 65 years and older.

As of the 2010 US Census, Skokie had a total of 64,784 people within its boundaries. The village's racial composition was 60.27% White, 7.26% African American, 0.19% Native American, 25.54% Asian, 0.02% Pacific Islander, 3.08% some other race, and 3.65% of mixed race. Hispanic and Latinos, of any race, made up 8.84% of the total population. There is a large Jewish population in Skokie and many of the surrounding areas.

Skokie also contains a sizeable Assyrian population. Some Assyrian American organizations, such as the Assyrian Universal Alliance Foundation, report that Assyrians make up the largest ethnic group in Skokie, with the population estimate being upwards of 20,000. The population of the local high school district, Niles Township High School District 219, is reported to be about 30% Assyrian, making them the largest ethnic group at the school district as well.