Indigenous peoples occupied areas along the river for thousands of years. In historic times, the area of present-day Waco was occupied by the Wichita Indian tribe known as the "Waco" (Spanish: Hueco or Huaco).

In 1824, Thomas M. Duke was sent to explore the area after violence erupted between the Waco people and the European settlers. His report to Stephen F. Austin, described the Waco village:

After further violence, Austin halted an attempt to destroy their village in retaliation. In 1825, he made a treaty with them. The Waco were eventually pushed out of the region, settling north near present-day Fort Worth. In 1872, they were moved onto a reservation in Oklahoma with other Wichita tribes. In 1902, the Waco received allotments of land and became official US citizens. Neil McLennan settled in an area near the South Bosque River in 1838.Jacob De Cordova bought McLennan's property and hired a former Texas Ranger and surveyor named George B. Erath to inspect the area. In 1849, Erath designed the first block of the city. Property owners wanted to name the city Lamartine, but Erath convinced them to name the area Waco Village, after the Indians who had lived there. In March 1849, Shapley Ross built the first house in Waco, a double-log cabin, on a bluff overlooking the springs. His daughter Kate was the first settler child to be born in Waco. Because of this, Ross is considered to have been the founder of Waco, Texas.

In 1866, Waco's leading citizens embarked on an ambitious project to build the first bridge to span the wide Brazos River. They formed the Waco Bridge Company to build the 475-foot (145 m) brick Waco Suspension Bridge, which was completed in 1870. The company commissioned a firm owned by John Augustus Roebling in Trenton, New Jersey, to supply the cables and steelwork for the bridge, and contracted with Mr. Thomas M. Griffith, a civil engineer based in New York, for the supervisory engineering work on the bridge. The economic effects of the Waco bridge were immediate and large. The cowboys and cattle-herds following the Chisholm Trail north, crossed the Brazos River at Waco. Some chose to pay the Suspension Bridge toll, while others floated their herds down the river. The population of Waco grew rapidly, as immigrants now had a safe crossing for their horse-drawn carriages and wagons. Since 1971, the bridge has been open only to pedestrian traffic and is in the National Register of Historic Places.

In the late 19th century, a red-light district called the "Reservation" grew up in Waco, and prostitution was regulated by the city. The Reservation was suppressed in the early 20th century. In 1885, the soft drink Dr Pepper was invented in Waco at Morrison's Old Corner Drug Store.

In 1845, Baylor University was founded in Independence, Texas. It moved to Waco in 1886 and merged with Waco University, becoming an integral part of the city. The university's Strecker Museum was also the oldest continuously operating museum in the state until it closed in 2003, and the collections were moved to the new Mayborn Museum Complex. In 1873, AddRan College was founded by brothers Addison and Randolph Clark in Fort Worth. The school moved to Waco in 1895, changing its name to Add-Ran Christian University and taking up residence in the empty buildings of Waco Female College. Add-Ran changed its name to Texas Christian University in 1902 and left Waco after the school's main building burned down in 1910. TCU was offered a 50-acre (200,000 m²) campus and $200,000 by the city of Fort Worth to relocate there.

In the 1890s, William Cowper Brann published the highly successful Iconoclast newspaper in Waco. One of his targets was Baylor University. Brann revealed that Baylor officials had been importing South American children recruited by missionaries and making house-servants out of them. Brann was shot in the back by Tom Davis, a Baylor supporter. Brann then wheeled, drew his pistol, and killed Davis. Brann was helped home by his friends, and died there of his wounds.

In 1894, the first Cotton Palace fair and exhibition center was built to reflect the dominant contribution of the agricultural cotton industry in the region. Since the end of the Civil War, cotton had been cultivated in the Brazos and Bosque valleys, and Waco had become known nationwide as a top producer. Over the next 23 years, the annual exposition would welcome over eight million attendees. The opulent building which housed the month-long exhibition was destroyed by fire and rebuilt in 1910. In 1931, the exposition fell prey to the Great Depression, and the building was torn down. However, the annual Cotton Palace Pageant continues, hosted in late April in conjunction with the Brazos River Festival.

On September 15, 1896, "The Crash" took place about 15 miles (24 km) north of Waco. "The Crash at Crush" was a publicity stunt done by the Missouri–Kansas–Texas Railroad company (known as M-K-T or "Katy"), featuring two locomotives intentionally set to a head-on collision. Meant to be a family fun event with food, games, and entertainment, the Crash turned deadly when both boilers exploded simultaneously, sending metal flying in the air. Three people died and dozens were injured.

In 1916, an African American teenager named Jesse Washington was tortured, mutilated, and burned to death in the town square by a mob that seized him from the courthouse, where he had been convicted of murdering a white woman, to which he confessed. About 15,000 spectators, mostly citizens of Waco, were present. The commonly named Waco Horror drew international condemnation and became the cause célèbre of the nascent NAACP's anti-lynching campaign. In 2006, the Waco City Council officially condemned the lynching, which took place without opposition from local political or judicial leaders; the mayor and chief of police were spectators. On the centenary of the Lynching, May 15, 2016, the mayor apologized in a ceremony to some of Washington's descendants. A historical marker is being erected.

In the 1920s, despite the popularity of the Ku Klux Klan and high numbers of lynchings throughout Texas, Waco's authorities attempted to respond to the NAACP's campaign and institute more protections for African Americans or others threatened with mob violence and lynching. In 1923, Waco's Sheriff Leslie Stegall protected Roy Mitchell, an African American coerced into confessing to multiple murders, from mob lynching. Mitchell was the last Texan to be publicly executed in Texas, and also the last to be hanged before the introduction of the electric chair. In the same year, the Texas Legislature created the Tenth Civil Court of Appeals and placed it in Waco; it is now known as the 10th Court of Appeals.

In 1937, Grover C. Thomsen and R.H. Roark created a soft-drink called "Sun Tang Red Cream Soda". This would later become known as the soft drink Big Red.

On May 5, 1942, Waco Army Air Field opened as a basic pilot training school, and on June 10, 1949, the name was changed to Connally Air Force Base in memory of Col. James T. Connally, a local pilot killed in Japan in 1945. The name changed again in 1951 to the James Connally Air Force Base. The base closed in May 1966 and is now the location of Texas State Technical College, formerly Texas State Technical Institute, since 1965. The airfield is still in operation, now known as TSTC Waco Airport, and was used by Air Force One when former US President George W. Bush visited his Prairie Chapel Ranch, also known as the Western White House, in Crawford, Texas.

In 1951, the American Income Life Insurance Company was founded by Harold Goodman.

On May 11, 1953, a tornado hit downtown Waco, killing 114. As of 2011, it remains the 11th-deadliest tornado in U.S. history and tied for the deadliest in Texas state history. It was the first tornado tracked by radar and helped spur the creation of a nationwide storm surveillance system. A granite monument featuring the names of those killed was placed downtown in 2004.

In 1964, the Texas Department of Public Safety designated Waco as the site for the state-designated official museum of the legendary Texas Rangers law enforcement agency founded in 1823. In 1976, it was further designated the official Hall of Fame for the Rangers and renamed the Texas Ranger Hall of Fame and Museum. Renovations by the Waco government earned this building green status, the first Waco government-led project of its nature. The construction project has fallen under scrutiny for expanding the building over unmarked human graves.

In 1978, bones were discovered emerging from the mud at the confluence of the Brazos and Bosque Rivers. Subsequent excavations revealed that the bones were 68,000 years old and belonged to a species of mammoth. Eventually, the remains of at least 24 mammoths, one camel, and one large cat were found at the site, making it one of the largest findings of its kind. Scholars have puzzled over why such a large herd had been killed all at once. The site is currently being looked at by the National Park Service for possible inclusion into the National Park system. They are conducting a special resource study to be presented to Congress. The bones are currently on display at the Waco Mammoth National Monument, part of the National Park Service.

On February 28, 1993, a shootout occurred in which six Branch Davidians and four agents of the United States Bureau of Alcohol, Tobacco and Firearms died. After 51 days, on April 19, 1993, a standoff between FBI agents and the Branch Davidians ended in a fire that destroyed their compound, referred to as Mt. Carmel, thirteen miles from Waco. 74 people, including leader David Koresh, died in the blaze. This event became known as the Waco siege.

During the presidency of George W. Bush, Waco was the home to the White House Press Center. The press center provided briefing and office facilities for the press corps whenever Bush visited his "Western White House" Prairie Chapel Ranch near Crawford, about 25 miles (40 km) northwest of Waco.

On May 17, 2015, a violent dispute among rival biker gangs broke out at Twin Peaks restaurant. The Waco police intervened, with nine dead and 18 injured in the incident. More than 170 were arrested. No bystanders, Twin Peak employees, or officers were killed in the process. This was the most high-profile criminal incident since the Waco siege, and the deadliest shootout in the city's history.

On May 9, 2020, the city's local meat processing plant run by Sanderson Farms reported two cases of COVID-19 during the 2019-20 coronavirus pandemic.

At the census of 2010, 124,805 people resided in the city, organized into 51,452 households and 27,115 families. The population density was recorded as 1,350.6 people per square mile (521.5/km²), with 45,819 housing units at an average density of 544.2 per square mile (210.1/km²). The 2000 racial makeup of the city was 60.8% White, 22.7% African American, 1.4% Asian, 0.5% Native American, 0.1% Pacific Islander, 12.4% from other races, and 2.3% from two or more races. About 23.6% of the population was Hispanic or Latino of any race. Non-Hispanic Whites were 45.8% of the population in 2010, down from 66.6% in 1980.

In 2000, the census recorded 42,279 households, of which 29.5% had children under the age of 18 living with them, 38.4% were married couples living together, 16.2% had a female householder with no husband present, and 41.4% were not families. Around 31.1% of all households were made up of individuals, and 10.9% had someone living alone at 65 years of age or older. The average household size was calculated as 2.49 and the average family size 3.19.

In 2000, 25.4% of the population was under the age of 18, 20.3% from 18 to 24, 25.0% from 25 to 44, 16.0% from 45 to 64, and 13.4% who were 65 years of age or older. The median age was 28 years. For every 100 females, there were 91.4 males. For every 100 females age 18 and over, there were 87.3 males.

The median income for a household in the city was $26,264, and for a family was $33,919. Males had a median income of $26,902 versus $21,159 for females. The per capita income for the city was $14,584. About 26.3% of the population and 19.3% of families lived below the poverty line. Of the total population, 30.9% of those under the age of 18 and 13.0% of those 65 and older lived below the poverty line.