The first permanent residents arrived around 1847 to settle on land between the Grand and Little Calumet Rivers, on the south end of Lake Michigan. Those first residents were German farmers newly arrived from Europe looking for land and opportunity. Before that time, the area was a crossroad for Indian tribes, explorers, stagecoach lines and supply lines to the West. Convenient location and abundant fresh water from Lake Michigan led to the beginning of Hammond's industrialization in 1869 with the George H. Hammond Company meat-packing plant following merchants and farmers to the area. Hammond was incorporated on April 21, 1884, and was named after the Detroit butcher. Hammond is one of the oldest cities in Lake County, with Crown Point being the oldest, established in 1834. According to the Encyclopedia of Chicago, George Henry Hammond, a pioneer in the use of refrigerated railcars for the transport of fresh meat, first used this method with his small packing company in Detroit, Michigan. In 1868, Hammond received a patent for a refrigerator car design. In the early 1870s, he built a new plant in northern Indiana along the tracks of the Michigan Central Railroad. By 1873, the George H. Hammond Co. was selling $1 million worth of meat a year; by 1875, sales were nearly $2 million. The company's large packing house in Hammond—the town had taken the name of its most powerful resident—rivaled those located at the Union Stock Yard in Chicago. By the middle of the 1880s, when it built a new plant in Omaha, Nebraska, Hammond was slaughtering over 100,000 cattle a year and owned a fleet of 800 refrigerator cars. After Hammond died in 1886, the company became less important and no longer challenged the giant Chicago packers, who acquired Hammond at the turn of the century and merged it into their National Packing Co.

The Hammond Whiting & East Chicago Electric Railway Company trolley service ran from 1893 to 1940.

On June 22, 1918, the Hammond circus train wreck occurred about 5.5 miles (8.9 km) east of the city, killing 86 and injuring 127 persons.

The downtown Hammond shopping district along State Street and Hohman Avenue included major chains such as Sears and J. C. Penney. The largest stores in downtown were the Goldblatt's and E.C. Minas department stores. The E.C. Minas store was constructed in 1894 and was in business until August 1984. The building which housed the Goldblatt's store had been purchased by the Chicago-based retailer in 1931 and operated until 1982 when it closed due to bankruptcy.

The Pullman Standard Car Company built M4 Sherman tanks in Hammond during World War II.

Architect Victor Gruen designed the Woodmar Mall in the Woodmar neighborhood. The mall opened in 1954 and was anchored by a Carson Pirie Scott and Co. store.

According to the 1960 United States Census Hammond's population reached a record high of 111,698 residents. Hammond, like other industrial cities in the Rust Belt, went into decline during the 1970s and 1980s, with the city's population plunging to 94,000 in 1980, and 83,000 in 2000. However, Hammond's economy was more diversified than neighboring Gary, Indiana, East Chicago, Indiana, and the south side of Chicago, which all relied on heavy industry (primarily steel production). Hammond's economy, on the other hand, depended on light manufacturing, transportation & warehousing, retail, banking & insurance, healthcare, hospitality & food service, and construction. Prominent manufacturing companies in Hammond include Unilever's soap factory, Atlas Tube, Cargill food processing, Munster Steel, Lear Seating Corporation, Jupiter Aluminum, Tri-State Automation, and Dover Chemical. Warehousing and storage is also prominent, with ExxonMobil and Marathon Petroleum having large oil storage facilities, and FedEx has a distribution center. Large railroad marshalling yards are also present in the city, with the Indiana Harbor Belt Railroad's headquarters in the city. The State Line Generating Plant operated on the Indiana-Illinois state line from 1929 to 2012, and was demolished in 2014.

The Empress Casino opened in Hammond in June 1996 and was replaced with the Horseshoe Hammond casino in 2001.

In February 2006, the decision was made to demolish Woodmar Mall except for the Carson's store. The Hammond Redevelopment Commission announced plans in June 2016 for a $12 million sports complex to be built on the site of the former mall. The Carson's store closed in 2018, and was demolished in 2019, as part of its parent company's liquidation.

The following single properties and national historic districts are listed on the National Register of Historic Places:

As of the 2010 United States Census, there were 80,830 people, 29,949 households, and 19,222 families residing in the city. The population density was 3,548.3 inhabitants per square mile (1,370.0/km²). There were 32,945 housing units at an average density of 1,446.2 per square mile (558.4/km²). The racial makeup of the city was 59.4% White, 22.5% African American, 0.5% Native American, 1.0% Asian, 13.3% from other races, and 3.3% from two or more races. Hispanic or Latino of any race were 34.1% of the population.

There were 29,949 households, of which 36.2% had children under the age of 18 living with them, 37.0% were married couples living together, 19.7% had a female householder with no husband present, 7.5% had a male householder with no wife present, and 35.8% were non-families. 30.3% 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 2.67 and the average family size was 3.36.

The median age in the city was 33.3 years. 27.6% of residents were under the age of 18; 10.1% were between the ages of 18 and 24; 27.3% were from 25 to 44; 24.2% were from 45 to 64; and 10.7% were 65 years of age or older. The gender makeup of the city was 49.0% male and 51.0% female.

As of the 2000 United States Census, there were 83,048 people, 32,026 households and 20,880 families residing in the city. The population density was 3,630.0 per square mile (1,401.4/km²). There were 34,139 housing units at an average density of 1,492.2 per square mile (576.1/km²). The racial makeup of the city was 72.35% White, 14.57% African American, 0.41% Native American, 0.46% Asian, 0.08% Pacific Islander, 9.32% from other races, and 2.81% from two or more races. Hispanic or Latino of any race were 21.04% of the population.

There were 32,026 households, out of which 31.8% had children under the age of 18 living with them, 42.9% were married couples living together, 16.9% had a female householder with no husband present, and 34.8% were non-families. 29.7% of all households were made up of individuals, and 10.9% had someone living alone who was 65 years of age or older. The average household size was 2.58 and the average family size was 3.23.

In the city, the population was spread out, with 27.3% under the age of 18, 9.8% from 18 to 24, 30.1% from 25 to 44, 19.8% from 45 to 64, and 13.0% who were 65 years of age or older. The median age was 34 years. For every 100 females, there were 95.3 males. For every 100 females age 18 and over, there were 92.2 males.

The median income for a household in the city was $35,528, and the median income for a family was $42,221. Males had a median income of $35,778 versus $25,180 for females. The per capita income for the city was $16,254. About 12.0% of families and 14.3% of the population were below the poverty line, including 19.7% of those under age 18 and 9.3% of those age 65 or over.