Bethesda is located in a region populated by the Piscataway and Nacotchtank tribes at the time of European colonization. Fur trader Henry Fleet became the first European to visit the area, reaching it by sailing up the Potomac River. He stayed with the Piscataway tribe from 1623 to 1627, either as a guest or prisoner (historical accounts differ). Fleet eventually secured funding for another expedition to the region, and was later granted proprietary rights to 2,000 acres in the nascent colony and became a member of Maryland’s colonial legislature. Raids from the Senecas and Susquehannock resulted in the creation of the Maryland division of Rangers in 1694 to patrol the frontier.

Most settlers in colonial Maryland were tenant farmers who paid their rent in tobacco, and colonists continued to expand farther north in search of fertile land. Henry Darnall (1645–1711) surveyed a 710-acre (290-hectare) area in 1694 which became the first land grant in Bethesda. and tobacco farming was the primary way of life in Bethesda throughout the 1700s. The city avoided seeing action during the Revolutionary War, although it became a supply region for the fledgling Continental Navy. The establishment of Washington, D.C. in 1790 deprived Montgomery County of its economic center at Georgetown, although the event had little effect on the small farmers throughout Bethesda.

Between 1805 and 1821, Bethesda became a rural way station after development of the Washington and Rockville Turnpike, which carried tobacco and other products between Georgetown and Rockville, and north to Frederick. A small settlement grew around a store and tollhouse along the turnpike by 1862 known as "Darcy's Store", named after the store's owner William E. Darcy. The settlement was renamed in 1871 by postmaster Robert Franck after the Bethesda Meeting House, a Presbyterian church built in 1820. The church burned in 1849 and was rebuilt the same year about 100 yards (91 m) south, and its former location became the Cemetery of the Bethesda Meeting House.

Bethesda did not develop beyond a small crossroads village through the 19th century. It consisted then of a blacksmith shop, a church and school, and a few houses and stores. In 1852, the postmaster general established a post office in Bethesda and appointed Rev. A. R. Smith its first postmaster. A streetcar line was established in 1890 and suburbanization increased in the early 1900s, and Bethesda began to grow in population. Communities that were situated near railroad lines had grown the fastest during the 19th century, but mass production of the automobile ended that dependency and Bethesda planners grew the community with the transportation revolution in mind. This included becoming a key stopping point for the B & O railroad on their Georgetown Branch line completed around 1910 that ran from Silver Spring to Georgetown, passing through Bethesda on the way. The branch had a storage yard there and multiple sidings that served the industries in Bethesda in the early 20th century. B & O successor CSX ceased train service on the line in 1985, so the county transformed it into a trail in the rails-to-trails movement. The tracks were removed in 1994 and the first part of the trail was opened in 1998; it has become the most used rail trail in the United States, averaging over one million users per year.

Subdivisions began to appear on old farmland in the late 19th century, becoming the neighborhoods of Drummond, Woodmont, Edgemoor, and Battery Park. Farther north, several wealthy men made Rockville Pike famous for its mansions. These included Brainard W. Parker ("Cedarcroft", 1892), James Oyster ("Strathmore", 1899), George E. Hamilton ("Hamilton House", 1904; now the Stone Ridge School), Luke I. Wilson ("Tree Tops", 1926), Gilbert Hovey Grosvenor ("Wild Acres", 1928–29), and George Freeland Peter ("Stone House", 1930). In 1930, Dr Armistead Peter's pioneering manor house "Winona" (1873) became the clubhouse of the Woodmont Country Club on land that is now part of the National Institutes of Health (NIH) campus. Merle Thorpe's mansion "Pook's Hill" (1927, razed 1948) became the home-in-exile of the Norwegian Royal Family during World War II.

World War II and the subsequent expansion of government further fed the rapid growth of Bethesda. Both the National Naval Medical Center (1940–42) and the NIH complex (1948) were built just to the north of the developing downtown, and this drew government contractors, medical professionals, and other businesses to the area. In recent years, Bethesda has consolidated as the major urban core and employment center of southwestern Montgomery County. This recent growth has been vigorous following the expansion of Metrorail with a station in Bethesda in 1984. Alan Kay built the Bethesda Metro Center over the Red line metro rail which opened up further commercial and residential development in the immediate vicinity. In the 2000s, the strict height limits on construction in the District of Columbia led to the development of mid- and high-rise office and residential towers around the Bethesda Metro stop, effectively creating a major urban center.^{[citation needed]}

As of the census of 2000, there were 55,277 people, 23,659 households, and 14,455 families residing in the CDP. The population density was 4,205.8 inhabitants per square mile (1,624.2/km²). There were 24,368 housing units at an average density of 1,854.1 per square mile (716.0/km²). The racial makeup of the CDP was 85.86% White, 2.67% Black or African American, 0.17% Native American, 7.92% Asian, 0.05% Pacific Islander, 1.23% from other races, and 2.11% from two or more races. 5.43% of the population were Hispanic or Latino of any race.

There were 23,659 households, out of which 28.0% had children under the age of 18 living with them, 53.4% were married couples living together, 6.0% had a female householder with no husband present, and 38.9% were non-families. 32.2% of all households were made up of individuals, and 11.6% 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 2.92.

In the CDP, the population was spread out, with 21.8% under the age of 18, 4.6% from 18 to 24, 29.2% from 25 to 44, 27.1% from 45 to 64, and 17.2% who were 65 years of age or older. The median age was 41 years. For every 100 females, there were 87.7 males. For every 100 females age 18 and over, there were 84.0 males.

Bethesda is a very wealthy and well-educated area. According to the 2000 Census, Bethesda was the best-educated city in the United States of America with a population of 50,000 or more. 79% of residents 25 or older have bachelor's degrees and 49% have graduate or professional degrees. According to a 2007 estimate, the median income for a household in the CDP was $117,723, and the median income for a family was $168,385. Males had a median income of $84,797 versus $57,569 for females. The per capita income for the CDP was $58,479. About 1.7% of families and 3.3% of the population were below the poverty line, including 1.8% of those under age 18 and 4.1% of those age 65 or over. Many commute to Washington, D.C. for work. The average price of a four bedroom, two bath home in Bethesda in 2010 was $806,817 (which ranks it as the twentieth most expensive community in America).

Bethesda is often associated with its neighboring communities, Potomac, Chevy Chase, Great Falls, Virginia, and McLean, Virginia, for their similar demographics. In April 2009, Forbes ranked Bethesda second on its list of "America's Most Livable Cities". In October 2009, based on education, income, health, and fitness, Total Beauty ranked Bethesda first on its list of the U.S.'s "Top 10 Hottest-Guy Cities." In 2009, Self magazine ranked Bethesda as the second healthiest place for women in the country, a year after ranking it number one. As of 2009, eight Pulitzer Prize winners live in Bethesda, as do several well-known political commentators (including George Will, David Brooks, and Thomas Friedman). In 2014, it placed first on both Forbes' list of America's most educated small towns and Time's list of top earning towns.