When European explorers arrived at this area, it was inhabited by a tribe of Miami Indians known as the Ouiatenon or Weas. In 1717, the French government established Fort Ouiatenon across the Wabash River and three miles (5 km) south of present-day Lafayette. The fort became the center of trade for fur trappers, merchants and Indians. An annual reenactment and festival known as Feast of the Hunters' Moon is held there each autumn.

The town of Lafayette was platted in May 1825 by William Digby, a trader. It was designated as the county seat of the newly formed Tippecanoe County the following year. Like many frontier towns, Lafayette was named for General Lafayette, a French officer who significantly aided George Washington's Continental Army during the American Revolutionary War. Lafayette toured the United States in 1824 and 1825.

In its earliest days, Lafayette was a shipping center on the Wabash River. In 1838, Henry Leavitt Ellsworth, the first United States Patent Commissioner, published a booklet titled Valley of the Upper Wabash, Indiana, with Hints on Its Agricultural Advantages, to promote settlement of the region. By 1845, Ellsworth had purchased 93,000 acres (380 km²) of farmland around Lafayette and moved there from Connecticut to supervise land sales. By 1847 Ellsworth was distributing broadsides looking for farmers to purchase his farmland. He became president of the Tippecanoe County Agricultural Society in April 1851 – despite some local resentment over what was called "the Yale Crowd" – but he was defeated the same year when he ran for the Indiana House of Representatives. Ellsworth Street and Ellsworth Historic District are named for him.

The Wabash and Erie Canal in the 1840s stimulated trade and affirmed Lafayette's regional prominence. Railroads arrived in the town in the 1850s, connecting it with other major markets. The Monon Railroad connected Lafayette with other sections of Indiana.

Lafayette was the site of the first official air mail delivery in the United States on 17 August 1859, when John Wise piloted a balloon starting on the Lafayette courthouse grounds. Wise hoped to reach New York; however, weather conditions forced the balloon down near Crawfordsville, Indiana, and the mail reached its final destination by train. In 1959, the US Postal Service issued a 7¢ airmail stamp commemorating the centennial of the event.

In 1992, the Greater Lafayette area (Lafayette and West Lafayette) was the first place in Indiana to experience the internet during the initial college town connection launching.^{[citation needed]}

Lafayette is the larger principal city of the Lafayette-Frankfort CSA, a Combined Statistical Area that includes the Lafayette metropolitan area (Benton, Carroll, and Tippecanoe counties) and the Frankfort micropolitan area (Clinton County), which had a combined population of 212,408 at the 2000 United States Census.

As of the 2010 United States Census, there were 67,140 people, 28,545 households, and 15,863 families in the city. The population density was 2,420.3 inhabitants per square mile (934.5/km²). There were 31,260 housing units at an average density of 1,126.9 per square mile (435.1/km²). The racial makeup of the city was 74.2% White, 11.2% African American, 0.4% Native American, 1% Asian, 0.0% from other races, and 2.7% from two or more races. Hispanic or Latino of any race were 16.3% of the population.

There were 28,545 households, of which 29.4% had children under the age of 18 living with them, 36.7% were married couples living together, 13.7% had a female householder with no husband present, 5.2% had a male householder with no wife present, and 44.4% were non-families. 34.9% of all households were made up of individuals, and 9% had someone living alone who was 65 years of age or older. The average household size was 2.30 and the average family size was 3.00.

The median age in the city was 31.9 years. 23.8% of residents were under the age of 18; 12.9% were between the ages of 18 and 24; 29.9% were from 25 to 44; 22.2% were from 45 to 64; and 11.3% were 65 years of age or older. The gender makeup of the city was 48.7% male and 51.3% female.

As of the 2000 United States Census, there were 56,397 people, 24,060 households, and 13,666 families in the city. The population density was 2,806.5 people per square mile (1,083.9/km²). There were 25,602 housing units at an average density of 1,274.1 per square mile (492.0/km²). The racial makeup of the city was 88.91% White; 3.22% African American; 0.37% Native American; 1.22% Asian; 0.04% Pacific Islander; 4.61% from other races, and 1.62% from two or more races. Hispanic or Latino of any race were 9.11% of the population.

There were 24,060 households, out of which 27.0% had children under the age of 18 living with them; 42.5% were married couples living together; 10.2% had a female householder with no husband present; and 43.2% were non-families. 33.2% of all households were made up of individuals, and 9.4% had someone living alone who was 65 years of age or older. The average household size was 2.31 individuals and the average family size was 2.98.

The city population contained 23.2% under the age of 18; 14.2% from 18 to 24; 31.3% from 25 to 44; 19.3% from 45 to 64; and 12.0% who were 65 years of age or older. The median age was 32 years. For every 100 females, there were 97.7 males. For every 100 females age 18 and over, there were 95.3 males.

The median income for a household in the city was $35,859, and the median income for a family was $45,480. Males had a median income of $32,892 versus $23,049 for females. The per capita income for the city was $19,217. About 8.0% of families and 12.1% of the population were below the poverty line, including 15.8% of those under age 18 and 4.6% of those age 65 or over.