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Native Americans, namely the Pennacook or Pentucket tribe, had a presence in this area. Evidence of farming at Den Rock Park and arrowhead manufacturing on the site of where the Wood Mill now sits have been discovered.

Europeans first settled the Haverhill area in 1640, colonists from Newbury following the Merrimack River in from the coast. The area that would become Lawrence was then part of Methuen and Andover. The first settlement came in 1655 with the establishment of a blockhouse in Shawsheen Fields, now South Lawrence.

The future site of the city (formerly parts of Andover and Methuen), was purchased by a consortium of local industrialists. The Water Power Association members: Abbott Lawrence, Edmund Bartlett, Thomas Hopkinson of Lowell, John Nesmith and Daniel Saunders, had purchased control of Peter's Falls on the Merrimack River and hence controlled Bodwell's Falls the site of the present Great Stone Dam. The group allotted fifty thousand dollars to buy land along the river to develop.^:11 In 1844, the group petitioned the legislature to act as a corporation, known as the Essex Company, which incorporated on April 16, 1845. The first excavations for the Great Stone Dam to harness the Merrimack River's water power were done on August 1, 1845.^:17 The Essex Company would sell the water power to corporations such as the Arlington Mills, as well as organize construction of mills and build to suit. Until 1847, when the state legislature recognized the community as a town, it was called interchangeably the "New City", "Essex" or "Merrimac".^:23 The post office, built in 1846, used the designation "Merrimac". Incorporation as a city would come in 1853, and the name "Lawrence", merely chosen as a token of respect to Abbott Lawrence, who it cannot be verified ever saw the city named after him.

Canals were dug on both the north and the south banks to provide power to the factories that would soon be built on its banks as both mill owners and workers from across the city and the world flocked to the city in droves; many were Irish laborers who had experience with similar building work. The work was dangerous: injuries and even death were not uncommon.

Working conditions in the mills were unsafe and in 1860 the Pemberton Mill collapsed, killing 145 workers. As immigrants flooded into the United States in the mid to late 19th century, the population of Lawrence abounded with skilled and unskilled workers from several countries.^{[citation needed]}

Lawrence was the scene of the infamous Bread and Roses Strike, also known as the Lawrence Textile Strike, one of the more important labor actions in American history.

Lawrence was a great wool-processing center until that industry declined in the 1950s. The decline left Lawrence a struggling city. The population of Lawrence declined from over 80,000 residents in 1950 (and a high of 94,270 in 1920) to approximately 64,000 residents in 1980, the low point of Lawrence's population.

Like other northeastern cities suffering from the effects of post-World War II industrial decline, Lawrence has often made efforts at revitalization, some of them controversial. For example, half of the enormous Wood Mill, powered by the Great Stone Dam and once the largest mills in the world, was knocked down in the 1950s.^{[citation needed]} The Lawrence Redevelopment Authority and city officials utilized eminent domain for a perceived public benefit, via a top-down approach, to revitalize the city throughout the 1960s. Known first as urban redevelopment, and then urban renewal, Lawrence's local government's actions towards vulnerable immigrant and poor communities, contained an undercurrent of gentrification which lies beneath the goals to revitalize Lawrence. There was a clash of differing ideals and perceptions of blight, growth, and what constituted a desirable community. Ultimately the discussion left out those members of the community who would be directly impacted by urban redevelopment.

Under the guise of urban renewal, large tracts of downtown Lawrence were razed in the 1970s, and replaced with parking lots and a three-story parking garage connected to a new Intown Mall intended to compete with newly constructed suburban malls. The historic Theater Row along Broadway was also razed, destroying ornate movie palaces of the 1920s and 1930s that entertained mill workers through the Great Depression and the Second World War. The city's main post office, an ornate federalist style building at the corner of Broadway and Essex Street, was razed. Most of the structures were replaced with one-story, steel-frame structures with large parking lots, housing such establishments as fast food restaurants and chain drug stores, fundamentally changing the character of the center of Lawrence.^{[citation needed]}

Lawrence also attempted to increase its employment base by attracting industries unwanted in other communities, such as waste treatment facilities and incinerators.^{[citation needed]} From 1980 until 1998, private corporations operated two trash incinerators in Lawrence. Activist residents successfully blocked the approval of a waste treatment center on the banks of the Merrimack River near the current site of Salvatore's Pizza on Merrimack Street.^{[citation needed]}

Recently the focus of Lawrence's urban renewal has shifted to preservation rather than sprawl.

Immigrants from the Dominican Republic and migrants from Puerto Rico began arriving in Lawrence in significant numbers in the late 1960s, attracted by cheap housing and a history of tolerance toward immigrants.^{[citation needed]} In 1984, tensions between remaining working class whites and increasing numbers of Hispanic youth flared into a riot, centered at the intersection of Haverhill Street and Oxford Street, where a number of buildings were destroyed by Molotov cocktails and over 300 people were arrested.

Lawrence saw further setbacks during the recession of the early 1990s as a wave of arson plagued the city. Over 200 buildings were set alight in an eighteen-month period in 1991–92, many of them abandoned residences and industrial sites. The Malden Mills factory burned down on December 11, 1995. CEO Aaron Feuerstein decided to continue paying the salaries of all the now-unemployed workers while the factory was being rebuilt.

A sharp reduction in violent crime starting in 2004 and massive private investment in former mill buildings along the Merrimack River, including the remaining section of the historic Wood Mill – to be converted into commercial, residential and education uses – have lent encouragement to boosters of the city.^{[citation needed]} One of the final remaining mills in the city is Malden Mills. Lawrence's downtown has seen a resurgence of business activity as Hispanic-owned businesses have opened along Essex Street, the historic shopping street of Lawrence that remained largely shuttered since the 1970s.^{[citation needed]} In June 2007, the city approved the sale of the Intown Mall, largely abandoned since the early 1990s recession, to Northern Essex Community College for the development of a medical sciences center, the construction of which commenced in 2012 when the InTown Mall was finally removed. A large multi-structure fire in January 2008 destroyed many wooden structures just south of downtown. A poor financial situation that has worsened with the recent global recession and has led to multiple municipal layoffs had Lawrence contemplating receivership. On February 9, 2019, in recognition of the role the town has played in the labor movement, Senator Elizabeth Warren officially announced her candidacy for President of the United States in Lawrence.

On September 13, 2018, a series of gas explosions and fires broke out in as many as 40 homes in Lawrence, Andover, and North Andover. The disaster killed one resident and caused over 30,000 customers to evacuate their homes. A year after this first incident on September 27, 2019 there was another gas leak causing people to evacuate their homes again.

According to the U.S. Census Bureau 2010 Census, the city's population is 76,377, the population density is 10,973.7 per square mile (4237/km²), and there are 27,137 households (25,181 occupied).

The racial makeup of the city in 2016 was 16.6% non-Hispanic white, 7.8% Black or African American, 2.8% Asian (1.2% Cambodian, 0.7% Vietnamese, 0.3% Pakistani, 0.2% Indian, 0.2% Chinese, 0.1% Korean), 0.4% American Indian or Alaskan Native, 0.0% Pacific Islander, 39.3% some other race, 2.7% two or more races, and 77.1% of the population is Hispanic or Latino (of any race) (47.0% Dominican, 21.7% Puerto Rican, 3.0% Guatemalan, 0.7% Salvadoran, 0.7% Spanish, 0.6% Cuban, 0.5% Ecuadorian, 0.5% Mexican, 0.2% Honduran, 0.2% Colombian, 0.1% Venezuelan, 0.1% Nicaraguan, 0.1% Peruvian).

As of the census of 2000, there were 72,043 people, 24,463 households, and 16,903 families residing in the city. The population density was 10,351.4 people per square mile (3,996.5/km²). There were 25,601 housing units at an average density of 3,678.4 per square mile (1,420.2/km²). The racial makeup of the city was 48.64% White (U.S. Average: 72.4%), 4.88% African American (U.S. Average: 12.3%), 2.65% Asian (U.S. Average: 3.6%), 0.81% Native American (U.S. Average: 0.1%), 0.10% Pacific Islander (U.S. Average: 0.1%), 36.67% from other races (U.S. Average: 5.5%), 6.25% from two or more races (U.S. Average: 2.4%).

There were 24,463 households where the average household size was 2.90 and the average family size was 3.46.

In the city, the population had a median age was 30.0 years (U.S. Average: 35.3):

For every 100 females, there were 91.6 males. For every 100 females age 18 and over, there were 86.8 males.

The median income for a household in the city was $25,983 (U.S. Average: $41,994), and the median income for a family was $29,809 (U.S. Average: $50,046). Males had a median income of $27,772 versus $23,137 for females. The per capita income for the city was $11,360. About 21.2% of families (U.S. Average: 9.2%) and 34.3% (U.S. Average: 12.4%) of the population were below the poverty line, including 31.7% of those under age 18 and 20.1% of those age 65 or over.

The Mayor of Lawrence, Daniel Rivera, said the city was "approximately 75% Spanish" following an incident where non English speaking callers were allegedly hung up on by a 911 operator.