The area that is now Manhattan was long inhabited by the Lenape Native Americans. In 1524, Florentine explorer Giovanni da Verrazzano – sailing in service of King Francis I of France – became the first documented European to visit the area that would become New York City. He entered the tidal strait now known as The Narrows and named the land around Upper New York Harbor New Angoulême, in reference to the family name of King Francis I that was derived from Angoulême in France; he sailed far enough into the harbor to sight the Hudson River, which he referred to in his report to the French king as a "very big river"; and he named the Bay of Santa Margarita – what is now Upper New York Bay – after Marguerite de Navarre, the elder sister of the king.

It was not until the voyage of Henry Hudson, an Englishman who worked for the Dutch East India Company, that the area was mapped. Hudson came across Manhattan Island and the native people living there in 1609, and continued up the river that would later bear his name, the Hudson River, until he arrived at the site of present-day Albany.

A permanent European presence in New Netherland began in 1624, with the founding of a Dutch fur trading settlement on Governors Island. In 1625, construction was started on the citadel of Fort Amsterdam on Manhattan Island, later called New Amsterdam (Nieuw Amsterdam), in what is now Lower Manhattan. The 1625 establishment of Fort Amsterdam at the southern tip of Manhattan Island is recognized as the birth of New York City.

According to a letter by Pieter Janszoon Schagen, Peter Minuit and Dutch colonists acquired Manhattan on May 24, 1626, from unnamed Native American people, who are believed to have been Canarsee Indians of the Lenape, in exchange for traded goods worth 60 guilders, often said to be worth US$24. The figure of 60 guilders comes from a letter by a representative of the Dutch Estates General and member of the board of the Dutch West India Company, Pieter Janszoon Schagen, to the Estates General in November 1626. In 1846, New York historian John Romeyn Brodhead converted the figure of Fl 60 (or 60 guilders) to US$24 (because 24 = 60/2.5, 1 dollar = confused with rijksdaalder = 2.5 guilders). "[A] variable-rate myth being a contradiction in terms, the purchase price remains forever frozen at twenty-four dollars," as Edwin G. Burrows and Mike Wallace remarked in their history of New York. Sixty guilders in 1626 was valued at approximately $1,000 in 2006, according to the Institute for Social History of Amsterdam. Based on the price of silver, "The Straight Dope" newspaper column calculated an equivalent of $72 in 1992. Historians James and Michelle Nevius revisited the issue in 2014, suggesting that using the prices of beer and brandy as monetary equivalencies, the price Minuit paid would have the purchasing power of somewhere between $2,600 and $15,600 in current dollars. According to the writer Nathaniel Benchley, Minuit conducted the transaction with Seyseys, chief of the Canarsee Native Americans, who were willing to accept valuable merchandise in exchange for the island that was mostly controlled by the Weckquaesgeeks, a band of the Wappinger.

In 1647, Peter Stuyvesant was appointed as the last Dutch Director-General of the colony. New Amsterdam was formally incorporated as a city on February 2, 1653. In 1664, the English conquered New Netherland and renamed it "New York" after the English Duke of York and Albany, the future King James II. The Dutch, under Director General Stuyvesant, successfully negotiated with the English to produce 24 articles of provisional transfer, which sought to retain for the extant citizens of New Netherland their previously attained liberties (including freedom of religion) under their new English rulers.

The Dutch Republic re-captured the city in August 1673, renaming it "New Orange". New Netherland was ultimately ceded to the English in November 1674 through the Treaty of Westminster.

Manhattan was at the heart of the New York Campaign, a series of major battles in the early American Revolutionary War. The Continental Army was forced to abandon Manhattan after the Battle of Fort Washington on November 16, 1776. The city, greatly damaged by the Great Fire of New York during the campaign, became the British military and political center of operations in North America for the remainder of the war. The military center for the colonists was established in New Jersey. British occupation lasted until November 25, 1783, when George Washington returned to Manhattan, as the last British forces left the city.

From January 11, 1785, to the fall of 1788, New York City was the fifth of five capitals of the United States under the Articles of Confederation, with the Continental Congress meeting at New York City Hall (then at Fraunces Tavern). New York was the first capital under the newly enacted Constitution of the United States, from March 4, 1789, to August 12, 1790, at Federal Hall. Federal Hall was also the site where the United States Supreme Court met for the first time, the United States Bill of Rights were drafted and ratified, and where the Northwest Ordinance was adopted, establishing measures for adding new states to the Union.

New York grew as an economic center, first as a result of Alexander Hamilton's policies and practices as the first Secretary of the Treasury and, later, with the opening of the Erie Canal in 1825, which connected the Atlantic port to the vast agricultural markets of the Midwestern United States and Canada. By 1810, New York City, then confined to Manhattan, had surpassed Philadelphia as the largest city in the United States. The Commissioners' Plan of 1811 laid out the island of Manhattan in its familiar grid plan.

Tammany Hall, a Democratic Party political machine, began to grow in influence with the support of many of the immigrant Irish, culminating in the election of the first Tammany mayor, Fernando Wood, in 1854. Tammany Hall dominated local politics for decades. Central Park, which opened to the public in 1858, became the first landscaped public park in an American city.

New York City played a complex role in the American Civil War. The city's strong commercial ties to the southern United States existed for many reasons, including the industrial power of the Hudson River, which allowed trade with stops such as the West Point Foundry, one of the great manufacturing operations in the early United States; and the city's Atlantic Ocean ports, rendering New York City the American powerhouse in terms of industrial trade between the northern and southern United States. New York's growing immigrant population, which had originated largely from Germany and Ireland, began in the late 1850s to include waves of Italians and Central and Eastern European Jews flowing in en masse. Anger arose about conscription, with resentment at those who could afford to pay $300 to avoid service leading to resentment against Lincoln's war policies and fomenting paranoia about free Blacks taking the poor immigrants' jobs, culminating in the three-day-long New York Draft Riots of July 1863. These intense war-time riots are counted among the worst incidents of civil disorder in American history, with an estimated 119 participants and passersby massacred.

The rate of immigration from Europe grew steeply after the Civil War, and Manhattan became the first stop for millions seeking a new life in the United States, a role acknowledged by the dedication of the Statue of Liberty on October 28, 1886, a gift from the people of France. The new European immigration brought further social upheaval. In a city of tenements packed with poorly paid laborers from dozens of nations, the city became a hotbed of revolution (including anarchists and communists among others), syndicalism, racketeering, and unionization.

In 1883, the opening of the Brooklyn Bridge established a road connection to Brooklyn, across the East River. In 1874 the western portion of the present Bronx County was transferred to New York County from Westchester County, and in 1895 the remainder of the present Bronx County was annexed. In 1898, when New York City consolidated with three neighboring counties to form "the City of Greater New York", Manhattan and the Bronx, though still one county, were established as two separate boroughs. On January 1, 1914, the New York State Legislature created Bronx County and New York County was reduced to its present boundaries.

The construction of the New York City Subway, which opened in 1904, helped bind the new city together, as did additional bridges to Brooklyn. In the 1920s Manhattan experienced large arrivals of African-Americans as part of the Great Migration from the southern United States, and the Harlem Renaissance, part of a larger boom time in the Prohibition era that included new skyscrapers competing for the skyline. New York City became the most populous city in the world in 1925, overtaking London, which had reigned for a century. Manhattan's majority white ethnic group declined from 98.7% in 1900 to 58.3% by 1990.

On March 25, 1911, the Triangle Shirtwaist Factory fire in Greenwich Village killed 146 garment workers. The disaster eventually led to overhauls of the city's fire department, building codes, and workplace regulations.

The period between the World Wars saw the election of reformist mayor Fiorello La Guardia and the fall of Tammany Hall after 80 years of political dominance. As the city's demographics stabilized, labor unionization brought new protections and affluence to the working class, the city's government and infrastructure underwent a dramatic overhaul under La Guardia. Despite the Great Depression, some of the world's tallest skyscrapers were completed in Manhattan during the 1930s, including numerous Art Deco masterpieces that are still part of the city's skyline, most notably the Empire State Building, the Chrysler Building, and the 30 Rockefeller Plaza.

Returning World War II veterans created a postwar economic boom, which led to the development of huge housing developments targeted at returning veterans, the largest being Peter Cooper Village-Stuyvesant Town, which opened in 1947. In 1951–1952, the United Nations relocated to a new headquarters the East Side of Manhattan.

The Stonewall riots were a series of spontaneous, violent demonstrations by members of the gay community against a police raid that took place in the early morning hours of June 28, 1969, at the Stonewall Inn in the Greenwich Village neighborhood of Lower Manhattan. They are widely considered to constitute the single most important event leading to the gay liberation movement and the modern fight for LGBT rights.

In the 1970s, job losses due to industrial restructuring caused New York City, including Manhattan, to suffer from economic problems and rising crime rates. While a resurgence in the financial industry greatly improved the city's economic health in the 1980s, New York's crime rate continued to increase through the decade and into the beginning of the 1990s.

The 1980s saw a rebirth of Wall Street, and Manhattan reclaimed its role at the center of the worldwide financial industry. The 1980s also saw Manhattan at the heart of the AIDS crisis, with Greenwich Village at its epicenter. The organizations Gay Men's Health Crisis (GMHC) and AIDS Coalition to Unleash Power (ACT UP) were founded to advocate on behalf of those stricken with the disease.

By the 1990s crime rates started to drop dramatically due to revised police strategies, improving economic opportunities, gentrification, and new residents, both American transplants and new immigrants from Asia and Latin America. Murder rates that had reached 2,245 in 1990 plummeted to 537 by 2008, and the crack epidemic and its associated drug-related violence came under greater control. The outflow of population turned around, as the city once again became the destination of immigrants from around the world, joining with low interest rates and Wall Street bonuses to fuel the growth of the real estate market. Important new sectors, such as Silicon Alley, emerged in Manhattan's economy.

On September 11, 2001, two of four hijacked planes were flown into the Twin Towers of the original World Trade Center, and the towers subsequently collapsed. 7 World Trade Center collapsed due to fires and structural damage caused by heavy debris falling from the collapse of the Twin Towers. The other buildings within the World Trade Center complex were damaged beyond repair and soon after demolished. The collapse of the Twin Towers caused extensive damage to other surrounding buildings and skyscrapers in Lower Manhattan, and resulted in the deaths of 2,606 people, in addition to those on the planes. Since 2001, most of Lower Manhattan has been restored, although there has been controversy surrounding the rebuilding. Many rescue workers and residents of the area developed several life-threatening illnesses that have led to some of their subsequent deaths.A memorial at the site was opened to the public on September 11, 2011, and the museum opened in 2014. In 2014, the new One World Trade Center, at 1,776 feet (541 m) and formerly known as the Freedom Tower, became the tallest building in the Western Hemisphere, while other skyscrapers were under construction at the site.

The Occupy Wall Street protests in Zuccotti Park in the Financial District of Lower Manhattan began on September 17, 2011, receiving global attention and spawning the Occupy movement against social and economic inequality worldwide.

On October 29 and 30, 2012, Hurricane Sandy caused extensive destruction in the borough, ravaging portions of Lower Manhattan with record-high storm surge from New York Harbor, severe flooding, and high winds, causing power outages for hundreds of thousands of city residents and leading to gasoline shortages and disruption of mass transit systems. The storm and its profound impacts have prompted the discussion of constructing seawalls and other coastal barriers around the shorelines of the borough and the metropolitan area to minimize the risk of destructive consequences from another such event in the future. Around 15 percent of the borough is considered to be in flood-risk zones.

On October 31, 2017, a terrorist took a rental pickup truck and deliberately drove down a bike path alongside the West Side Highway in Lower Manhattan, killing eight people and injuring a dozen others before crashing into a school bus.

At the 2010 U.S. census, there were 1,585,873 people living in Manhattan, an increase of 3.2% since 2000. Since 2010, Manhattan's population was estimated by the U.S. Census Bureau to have increased 2.7% to 1,628,706 as of 2018, representing 19.5% of New York City's population of 8,336,817 and 8.4% of New York State's population of 19,745,289. As of the 2017 census estimates, the population density of New York County was around 72,918 people per square mile (28,154/km²), the highest population density of any county in the United States. In 1910, at the height of European immigration to New York, Manhattan's population density reached a peak of 101,548 people per square mile (39,208/km²).

In 2006, the New York City Department of City Planning projected that Manhattan's population would increase by 289,000 people between 2000 and 2030, an increase of 18.8% over the period. However, since then, Lower Manhattan has been experiencing a baby boom, well above the overall birth rate in Manhattan, with the area south of Canal Street witnessing 1,086 births in 2010, 12% greater than 2009 and over twice the number born in 2001. The Financial District alone has witnessed growth in its population to approximately 43,000 as of 2014, nearly double the 23,000 recorded at the 2000 Census. The southern tip of Manhattan became the fastest growing part of New York City between 1990 and 2014.

According to the 2009 American Community Survey, the average household size was 2.11, and the average family size was 3.21. Approximately 59.4% of the population over the age of 25 have a bachelor's degree or higher. Approximately 27.0% of the population is foreign-born, and 61.7% of the population over the age of 5 speak only English at home. People of Irish ancestry make up 7.8% of the population, while Italian Americans make up 6.8% of the population. German Americans and Russian Americans make up 7.2% and 6.2% of the population respectively.

Manhattan is one of the highest-income places in the United States with a population greater than one million. As of 2012, Manhattan's cost of living was the highest in the United States, but the borough also contained the country's most profound level of income inequality. Manhattan is also the United States county with the highest per capita income, being the sole county whose per capita income exceeded $100,000 in 2010. However, from 2011–2015 Census data of New York County, the per capita income was recorded in 2015 dollars as $64,993, with the median household income at $72,871, and poverty at 17.6%. In 2012, The New York Times reported that inequality was higher than in most developing countries, stating, "The wealthiest fifth of Manhattanites made more than 40 times what the lowest fifth reported, a widening gap (it was 38 times, the year before) surpassed by only a few developing countries".

In 2010 statistics, the largest religious group in Manhattan was the Archdiocese of New York, with 323,325 Catholics worshipping at 109 parishes, followed by 64,000 Orthodox Jews with 77 congregations, an estimated 42,545 Muslims with 21 congregations, 42,502 non-denominational adherents with 54 congregations, 26,178 TEC Episcopalians with 46 congregations, 25,048 ABC-USA Baptists with 41 congregations, 24,536 Reform Jews with 10 congregations, 23,982 Mahayana Buddhists with 35 congregations, 10,503 PC-USA Presbyterians with 30 congregations, and 10,268 RCA Presbyterians with 10 congregations. Altogether, 44.0% of the population was claimed as members by religious congregations, although members of historically African-American denominations were underrepresented due to incomplete information. In 2014, Manhattan had 703 religious organizations, the seventeenth most out of all US counties.

As of 2010, 59.98% (902,267) of Manhattan residents, aged five and older, spoke only English at home, while 23.07% (347,033) spoke Spanish, 5.33% (80,240) Chinese, 2.03% (30,567) French, 0.78% (11,776) Japanese, 0.77% (11,517) Russian, 0.72% (10,788) Korean, 0.70% (10,496) German, 0.66% (9,868) Italian, 0.64% (9,555) Hebrew, and 0.48% (7,158) spoke African languages at home. In total, 40.02% (602,058) of Manhattan's population, aged five and older, spoke a language other than English at home.