The Lenape Native Americans called the point on which the city is built "Ompoge", meaning "level ground" or "standing or upright". When settled in 1684, the new city was dubbed "New Perth" in honor of James Drummond, Earl of Perth, one of the 12 associates of a company of Scottish proprietors; Drummond has been honored with a statue located outside of city hall. The Algonquian language name persisted, corrupted to Ambo, or Point Amboy, and eventually a combination of the native and colonial names emerged, also appearing in South Amboy.

Perth Amboy was settled by Scottish colonists around 1683 who had been recruited to inhabit the share of the East Jersey colony owned by Robert Barclay, a Quaker who would later become the absentee governor of the province.

Perth Amboy was formed by Royal charter on August 4, 1718, within various townships and again by New Jersey Legislature on December 21, 1784, within Perth Amboy Township and from part of Woodbridge Township. Perth Amboy Township was formed on October 31, 1693, and was enlarged during the 1720s to encompass Perth Amboy city. Perth Amboy Township was incorporated as one of New Jersey's initial 104 townships through the Township Act of 1798 on February 21, 1798. The township was replaced by Perth Amboy city on April 8, 1844.

Elizabeth (then known as Elizabethtown) was designated in 1668 as the first capital of New Jersey. In 1686, Perth Amboy was designated as the capital of East Jersey, while Burlington was the capital of West Jersey. After the two were united as a royal colony in 1702, the two cities alternated as the capital of the Province of New Jersey until November 1790, when Trenton was designated as the unified state capital, chosen based on its location midway between New York City and Philadelphia.

A few of the buildings from this early period can still be seen today. Most notably, the Proprietary House, the home of William Franklin, the last Royal Governor of New Jersey and estranged son of Benjamin Franklin, still stands in the waterfront area of the city. Architect John Edward Pryor was hired in 1761 to design and construct the building, which was completed in September 1764, years late and over budget. Franklin preferred his alternate home in Burlington. Franklin finally moved in 1774 into the Proprietary House. Franklin's father, Ben, tried unsuccessfully to convince his son to support the Colonial cause. William Franklin was arrested and detained at Proprietary House in 1776 until he was tried and convicted of treason.

Perth Amboy City Hall was first built as a court house for Middlesex County in 1714, having been designated as the county seat the previous year. The building was later used as the home of the East Jersey Provincial Assembly. The building was destroyed by a major fire in 1731 and rebuilt in 1745. Another fire was deliberately set in 1764, forcing a rebuilding that was completed in 1767. It is the oldest city hall in continuous use in the United States. On November 20, 1789, City Hall was the site where the New Jersey General Assembly met to ratify the Bill of Rights, becoming the first state in the nation to do so.

Market Square, located across from City Hall, is a park that had been an outdoor marketplace during the Colonial era. Market Square includes a replica of the Liberty Bell, a statue of George Washington and the Bill of Rights Arch, which commemorates the fact that New Jersey was the first state to ratify the Bill of Rights.

St. Peter's Church, which held its first service in 1685 and received a royal charter in 1718, has been recognized as the first Episcopal congregation in the state. Its current building, dating from the 1850s, is surrounded by a graveyard of early inhabitants and displays a collection of stained-glass windows with religious scenes as well as early depictions of New Jersey receiving her charter and a meeting between William Franklin and his father, Ben.

Perth Amboy was New Jersey's primary inbound port for African slaves.

The Kearny Cottage is a remaining example of 18th-century vernacular architecture. Operated as a historic house museum and operated by the Kearny Cottage Historical Society. Built in 1781 on High Street, the house was moved to Sadowski Parkway in the 1920s, and was later relocated to its current site at 63 Catalpa Avenue, just inland from the mouth of the Raritan River.

During the colonial period and for a significant time thereafter, Perth Amboy was an important way-station for travelers between New York City and Philadelphia, as it was the site of a ferry that crossed the Arthur Kill to Tottenville, Staten Island. The first ferry operated in 1684 and regular service began operating in 1709. This ferry became less important when the Outerbridge Crossing opened in 1928, but continued to operate until 1963. In 1998, the Perth Amboy Ferry Slip was restored to its 1904 appearance. A replica of the ticket office has been constructed and is used as a small museum.

On March 31, 1870, Thomas Mundy Peterson became the first African-American in the United States to vote in an election under the recently enacted provisions of the Fifteenth Amendment to the United States Constitution. Peterson voted in an election to update the Perth Amboy city charter.

By the middle of the 19th century, immigration and industrialization transformed Perth Amboy. Factories such as A. Hall and Sons Terra Cotta, Guggenheim and Sons and the Copper Works Smelting Company fueled a thriving downtown and employed many area residents. Growth was further stimulated by becoming the tidewater terminal for the Lehigh Valley Railroad and a coal shipping point. Perth Amboy developed tightly-knit and insular ethnic neighborhoods such as Budapest, Dublin, and Chickentown. Immigrants from Denmark, Poland, Hungary, Czechoslovakia, Italy, Russia, and Austria quickly dominated the factory jobs.

In 1903, the Perth Amboy Public Library, one of the first Carnegie libraries in the state, made possible through grants from Andrew Carnegie and donations by local philanthropists, opened to the public.

In 1914, Perth Amboy had a baseball team called the Pacers; they only played for one season.

In late August 1923, an estimated 6,000 persons rioted, breaking through police lines after the Ku Klux Klan attempted to organize a meeting in the city.

The city was a resort town in the 19th century and early 20th century, located on the northern edge of the Raritan Bayshore. Since the early 1990s Perth Amboy has seen redevelopment. Small businesses have started to open up, helped by the city's designation as an Urban Enterprise Zone. The waterfront has also seen a rebirth. The marina has been extended, and there are new promenades, parks, and housing overlooking the bay.

The chapter "More Alarms at Night" in humorist James Thurber's biography My Life and Hard Times involves Perth Amboy. One night during his adolescence in Ohio, young Thurber is unable to go to sleep because he cannot remember the name of this New Jersey community. He wakens his father, demanding that he start naming towns in New Jersey. When the startled father names several towns with single-word names, Thurber replies that the name he is seeking is "two words, like helter skelter". This convinces his father that Thurber has become dangerously insane. Thurber also wrote the story later made into the film The Secret Life of Walter Mitty, about an "inconsequential guy from Perth Amboy, New Jersey". Perth Amboy's water pumping station is located in Old Bridge Township.

The city is one of many U.S. communities with a majority Hispanic population.

The 2010 United States Census counted 50,814 people, 15,419 households, and 11,456 families in the city. The population density was 10,806.8 per square mile (4,172.5/km²). There were 16,556 housing units at an average density of 3,521.0 per square mile (1,359.5/km²). The racial makeup was 50.26% (25,541) White, 10.54% (5,358) Black or African American, 1.10% (561) Native American, 1.69% (859) Asian, 0.05% (27) Pacific Islander, 30.77% (15,634) from other races, and 5.58% (2,834) from two or more races. Hispanic or Latino of any race were 78.10% (39,685) of the population. The city's Hispanic population was the second-highest percentage among municipalities in New Jersey as of the 2010 Census, ranked behind Union City with 84.7%.

Of the 15,419 households, 40.0% had children under the age of 18; 40.1% were married couples living together; 24.6% had a female householder with no husband present and 25.7% were non-families. Of all households, 20.3% were made up of individuals and 7.5% had someone living alone who was 65 years of age or older. The average household size was 3.25 and the average family size was 3.65.

27.3% of the population were under the age of 18, 11.0% from 18 to 24, 30.2% from 25 to 44, 22.2% from 45 to 64, and 9.3% who were 65 years of age or older. The median age was 32.4 years. For every 100 females, the population had 97.3 males. For every 100 females ages 18 and older there were 94.3 males.

The Census Bureau's 2006–2010 American Community Survey showed that (in 2010 inflation-adjusted dollars) median household income was $47,696 (with a margin of error of +/− $3,644) and the median family income was $53,792 (+/− $2,943). Males had a median income of $38,485 (+/− $2,450) versus $30,078 (+/− $3,452) for females. The per capita income for the city was $20,162 (+/−$933). About 16.3% of families and 19.4% of the population were below the poverty line, including 28.8% of those under age 18 and 15.2% of those age 65 or over.

As of the 2000 United States Census there were 47,303 people, 14,562 households, and 10,761 families residing in the city. The population density was 9,892.0 people per square mile (3,820.9/km²). There were 15,236 housing units at an average density of 3,186.2 per square mile (1,230.7/km²). The racial makeup of the city was 46.41% White, 10.04% African American, 0.70% Native American, 1.53% Asian, 0.13% Pacific Islander, 35.59% from other races, and 5.61% from two or more races. Hispanic or Latino of any race were 69.83% of the population.

There were 14,562 households, out of which 40.3% had children under the age of 18 living with them, 44.6% were married couples living together, 21.0% had a female householder with no husband present, and 26.1% were non-families. 20.6% of all households were made up of individuals, and 8.8% had someone living alone who was 65 years of age or older. The average household size was 3.20 and the average family size was 3.63.

In the city the population was spread out, with 28.5% under the age of 18, 11.4% from 18 to 24, 31.6% from 25 to 44, 18.3% from 45 to 64, and 10.2% who were 65 years of age or older. The median age was 31 years. For every 100 females, there were 98.2 males. For every 100 females age 18 and over, there were 94.8 males.

The median income for a household in the city was $37,608, and the median income for a family was $40,740. Males had a median income of $29,399 versus $21,954 for females. The per capita income for the city was $14,989. About 14.3% of families and 17.6% of the population were below the poverty line, including 24.1% of those under age 18 and 12.8% of those age 65 or over.

In 2000, 27.79% of Perth Amboy residents identified themselves as being of Puerto Rican ancestry, the fifth highest concentration of Puerto Ricans on the U.S. mainland of those municipalities with 1,000 or more residents identifying their ancestry. In the same census, 18.81% of Perth Amboy residents identified themselves as being of Dominican ancestry, the third highest concentration in the country of Dominicans in the United States after Haverstraw, New York and Lawrence, Massachusetts using the same criteria.

People who were born in, residents of, or otherwise closely associated with Perth Amboy include: