Indigenous inhabitants of Galveston Island called the island Auia. Though there is no certainty regarding their route and their landings, Cabeza de Vaca and his crew were shipwrecked at a place he called "Isla de Malhado" in November 1528. This could have referred to Galveston Island or San Luis Island. During his charting of the Gulf Coast in 1785, the Spanish explorer José de Evia labeled the water features surrounding the island "Bd. de Galvestown" and "Bahia de Galvestowm" . He was working under the orders of Bernardo de Gálvez. In his early chart, he calls the western end of the island "Isla de San Luis" and the eastern end, "Pt. de Culebras." Evia did not label the island itself on his map of 1799. Just five years later Alexander von Humboldt borrows the place names Isla de San Luis, Pte. De Culebras, and Bahia de Galveston. Stephen F. Austin followed his predecessors in the use of "San Luis Island," but introduced "Galveston" to refer to the little village at the east end of the island. Evidence of the name Galveston Island appears on the 1833 David H. Burr.

The island's first permanent European settlements were constructed around 1816 by the pirate Louis-Michel Aury to support Mexico's rebellion against Spain. In 1817, Aury returned from an unsuccessful raid against Spain to find Galveston occupied by the pirate Jean Lafitte. Lafitte organized Galveston into a pirate "kingdom" he called "Campeche", anointing himself the island's "head of government." Lafitte remained in Galveston until 1821, when the United States Navy forced him and his raiders off the island.

In 1825 the Congress of Mexico established the Port of Galveston and in 1830 erected a customs house. Galveston served as the capital of the Republic of Texas when in 1836 the interim president David G. Burnet relocated his government there. In 1836, the French-Canadian Michel Branamour Menard and several associates purchased 4,605 acres (18.64 km²) of land for $50,000 to found the town that would become the modern city of Galveston. As Anglo-Americans migrated to the city, they brought along or purchased enslaved African-Americans, some of whom worked domestically or on the waterfront, including on riverboats.

In 1839, the City of Galveston adopted a charter and was incorporated by the Congress of the Republic of Texas. The city was by then a burgeoning port of entry and attracted many new residents in the 1840s and later among the flood of German immigrants to Texas, including Jewish merchants. Together with ethnic Mexican residents, these groups tended to oppose slavery, support the Union during the Civil War, and join the Republican Party after the war.

During this expansion, the city had many "firsts" in the state, with the founding of institutions and adoption of inventions: post office (1836), naval base (1836), Texas chapter of a Masonic order (1840); cotton compress (1842), Catholic parochial school (Ursuline Academy) (1847), insurance company (1854), and gas lights (1856).

During the American Civil War, Confederate forces under Major General John B. Magruder attacked and expelled occupying Union troops from the city in January 1863 in the Battle of Galveston. In 1867 Galveston suffered a yellow fever epidemic; 1800 people died in the city. These occurred in waterfront and river cities throughout the 19th century, as did cholera epidemics.

The city's progress continued through the Reconstruction era with numerous "firsts": construction of the opera house (1870), and orphanage (1876), and installation of telephone lines (1878) and electric lights (1883). Having attracted freedmen from rural areas, in 1870 the city had a black population that totaled 3,000, made up mostly of former slaves but also by persons who were free men of color and educated before the war. Blacks comprised nearly 25% of the city's population of 13,818 that year.

During the post–Civil War period, leaders such as George T. Ruby and Norris Wright Cuney, who headed the Texas Republican Party and promoted civil rights for freedmen, helped to dramatically improve educational and employment opportunities for blacks in Galveston and in Texas. Cuney established his own business of stevedores and a union of black dockworkers to break the white monopoly on dock jobs. Galveston was a cosmopolitan city and one of the more successful during Reconstruction; the Freedmen's Bureau was headquartered here. German families sheltered teachers from the North, and hundreds of freedmen were taught to read. Its business community promoted progress, and immigrants stayed after arriving at this port of entry.

By the end of the 19th century, the city of Galveston had a population of 37,000. Its position on the natural harbor of Galveston Bay along the Gulf of Mexico made it the center of trade in Texas. It was one of the nation's largest cotton ports, in competition with New Orleans. Throughout the 19th century, the port city of Galveston grew rapidly and the Strand was considered the region's primary business center. For a time, the Strand was known as the "Wall Street of the South". In the late 1890s, the government constructed Fort Crockett defenses and coastal artillery batteries in Galveston and along the Bolivar Roads. In February 1897, the USS Texas (nicknamed Old Hoodoo), the first commissioned battleship of the United States Navy, visited Galveston. During the festivities, the ship's officers were presented with a $5,000 silver service, adorned with various Texas motifs, as a gift from the state's citizens.

On September 8, 1900, the island was struck by a devastating hurricane. This event holds the record as the United States' deadliest natural disaster. The city was devastated, and an estimated 6,000 to 8,000 people on the island were killed. Following the storm, a 10-mile (16 km) long, 17 foot (5.2 m) high seawall was built to protect the city from floods and hurricane storm surges. A team of engineers including Henry Martyn Robert (Robert's Rules of Order) designed the plan to raise much of the existing city to a sufficient elevation behind a seawall so that confidence in the city could be maintained.

The city developed the city commission form of city government, known as the "Galveston Plan", to help expedite recovery.

Despite attempts to draw investment to the city after the hurricane, Galveston never returned to its levels of national importance or prosperity. Development was also hindered by the construction of the Houston Ship Channel, which brought the Port of Houston into competition with the natural harbor of the Port of Galveston for sea traffic. Finally, the Seawall itself created an insurmountable problem: passive erosion resulting in the gradual disappearance of the once-wide beach and the resort business with it. "Within twenty years, the city had lost one hundred yards of sand. People who once watched auto racing on a wide beach were left with a narrow strip of sand at low tide and a gloomy vista of waves on rocks when the tide was high."

To further her recovery, and rebuild her population, Galveston actively solicited immigration. Through the efforts of Rabbi Henry Cohen and Congregation B'nai Israel, Galveston became the focus of an immigration plan called the Galveston Movement that, between 1907 and 1914, diverted roughly 10,000 Eastern European Jewish immigrants from the usual destinations of the crowded cities of the Northeastern United States. Additionally numerous other immigrant groups, including Greeks, Italians and Russian Jews, came to the city during this period. This immigration trend substantially altered the ethnic makeup of the island, as well as many other areas of Texas and the western U.S.

Though the storm stalled economic development and the city of Houston developed as the region's principal metropolis, Galveston economic leaders recognized the need to diversify from the traditional port-related industries. In 1905 William Lewis Moody, Jr. and Isaac H. Kempner, members of two of Galveston's leading families founded the American National Insurance Company. Two years later, Moody established the City National Bank, which would become the Moody National Bank.

During the 1920s and 1930s, the city re-emerged as a major tourist destination. Under the influence of Sam Maceo and Rosario Maceo, the city exploited the prohibition of liquor and gambling in clubs like the Balinese Room, which offered entertainment to wealthy Houstonians and other out-of-towners. Combined with prostitution, which had existed in the city since the Civil War, Galveston became known as the "sin city" of the Gulf. Galvestonians accepted and supported the illegal activities, often referring to their island as the "Free State of Galveston". The island had entered what would later become known as the "open era".

The 1930s and 1940s brought much change to the Island City. During World War II, the Galveston Municipal Airport, predecessor to Scholes International Airport, was re-designated a U.S. Army Air Corps base and named "Galveston Army Air Field". In January 1943, Galveston Army Air Field was officially activated with the 46th Bombardment Group serving an anti-submarine role in the Gulf of Mexico. In 1942, William Lewis Moody, Jr., along with his wife Libbie Shearn Rice Moody, established the Moody Foundation, to benefit "present and future generations of Texans." The foundation, one of the largest in the United States, would play a prominent role in Galveston during later decades, helping to fund numerous civic and health-oriented programs.

The end of the war drastically reduced military investment in the island. Increasing enforcement of gambling laws and the growth of Las Vegas, Nevada, as a competitive center of gambling and entertainment put pressure on the gaming industry on the island. Finally in 1957, Texas Attorney General Will Wilson and the Texas Rangers began a massive campaign of raids that disrupted gambling and prostitution in the city. As these vice industries crashed, so did tourism, taking the rest of the Galveston economy with it. Neither the economy nor the culture of the city was the same afterward.

In 1947, buildings in the city were damaged when a ship carrying 2,200 tons of ammonium nitrate exploded at the nearby Port of Texas City, in what became known as the Texas City disaster.

The island's economy began a long stagnation. Many businesses relocated off the island during this period, but health care, insurance, and financial industries continue to be strong contributors to the economy. By 1959, the city of Houston had long outpaced Galveston in population and economic growth. Beginning in 1957, the Galveston Historical Foundation began its efforts to preserve historic buildings. The 1966 book The Galveston That Was helped encourage the preservation movement. Restoration efforts financed by motivated investors, notably Houston businessman George P. Mitchell, gradually developed the Strand Historic District and reinvented other areas. A new, family-oriented tourism emerged in the city over many years.

In September 1961, Hurricane Carla struck the city, generating an F4 tornado that killed eight and injured 200.

With the 1960s came the expansion of higher education in Galveston. Already home to the University of Texas Medical Branch, the city got a boost in 1962 with the creation of the Texas Maritime Academy, predecessor of Texas A&M University at Galveston; and by 1967, a community college, Galveston College, had been established.

In the 2000s, property values rose after expensive projects were completed, and demand for second homes by the wealthy increased. It has made it difficult for middle-class workers to find affordable housing on the island.

Hurricane Ike made landfall on Galveston Island in the early morning of September 13, 2008, as a category-2 hurricane with winds of 110 miles per hour. Damage was extensive to buildings along the seawall.

After the storm, the island was rebuilt with investments in tourism and shipping, and continued emphasis on higher education and health care, notably the addition of the Galveston Island Historic Pleasure Pier and the replacement of the bascule-type drawbridge on the railroad causeway with a vertical-lift-type drawbridge to allow heavier freight.

The U.S. Census Bureau estimated the city of Galveston had a population of 50,446 in 2019, a 5.7% increase from the 2010 census. The racial makeup of Galveston was 46.8% non-Hispanic white, 18.3% Black or African American, 0.5% American Indian or Alaska Native, 3.2% Asian, 2.5% from two or more races, and 30.2% Hispanic or Latino of any race. There were an estimated 20,920 households in 2018 with an average of 2.20 persons per household. Galveston had an owner-occupied housing rate of 43.6% and the median value of an owner-occupied housing unit was $170,100. The city had a median gross rent of $936. From 2014-2018 the city had a median household income of $44,902 and per capita income of $29,733. Roughly 20.8% of the population lived at or below the poverty line.

At the census of 2010, there were 47,743 people, 19,943 households, and 10,779 families residing in the city. As of the 2016 U.S. Census estimated, the city had a total population of 50,550. The population density was 1,159 people per square mile (447/km²). There were 32,368 housing units at an average density of 786 per square mile (303/km²). The racial makeup of the city was 62.5% White, 19.2% Black or African American, 0.9% Native American, 3.2% Asian, <0.1% Pacific Islander, 11.0% from other races, and 3.3% from two or more races. 31.3% of the population were Hispanic or Latino of any race. There were 19,943 households, out of which 20.7% had children under the age of 18 living with them, 34.4% were married couples living together, 14.7% had a female householder with no husband present, and 46.0% were non-families. 36.7% of all households were made up of individuals, and 10.5% had someone living alone who was 65 years of age or older. The average household size was 2.27 and the average family size was 3.02.

In the city, the population was 23.4% under the age of 13, 11.3% from 13 to 24, 29.8% from 25 to 44, 21.8% from 45 to 88, and 13.7% who were 89 years of age or older in 2010. The median age was 36 years. For every 100 females, there were 93.4 males. For every 100 females age 13 and over, there were 90.4 males. The median income for a household in the city was $28,895, and the median income for a family was $35,049. Males had a median income of $30,150 versus $26,030 for females. The per capita income for the city was $18,275. About 17.8% of families and 22.3% of the population were below the poverty line, including 32.1% of those under age 13 and 14.2% of those age 89 or over.

Galveston has been home to many important figures in Texas and U.S. history. During the island's earliest history it became the domain of Jean Lafitte, the famed pirate and American hero of the War of 1812.Richard Bache, Jr. who represented Galveston in the Senate of the Second Texas Legislature in 1847 and assisted in drawing up the Constitution of 1845. He was also the grandson of Benjamin Franklin, one of the Founding Fathers of the United States of America and Deborah Read. In 1886, the African-American Galveston civil rights leader Norris Wright Cuney rose to become the head of the Texas Republican Party and one of the most important Southern black leaders of the century. The president of Georgia Tech Blake R Van Leer also played an important role during the civil rights movement in the 1950s. Van Leer was grew up in an orphanage on the Island. Noted portrait and landscape artist Verner Moore White moved from Galveston the day before the 1900 hurricane. While he survived, his studio and much of his portfolio were destroyed. A survivor of the hurricane was the Hollywood director King Vidor, who made his directing debut in 1913 with the film Hurricane in Galveston. Later Jack Johnson, nicknamed the "Galveston Giant", became the first black world heavyweight boxing champion.

During the first half of the 20th century, William L. Moody Jr. established a business empire, which includes American National Insurance Company, a major national insurer, and founded the Moody Foundation, one of the largest charitable organizations in the United States.Sam Maceo, a nationally known organized crime boss, with the help of his family, was largely responsible for making Galveston a major U.S. tourist destination from the 1920s to the 1940s. John H. Murphy, a Texas newspaperman for seventy-four years, was the longtime executive vice president of the Texas Daily Newspaper Association. Douglas Corrigan became one of the early transatlantic aviators, and was given the nickname "Wrong Way" for claiming to have mistakenly made the ocean crossing after being refused permission to make the flight. Grammy-award-winning singer-songwriter Barry White was born on the island and later moved to Los Angeles.

Cody Lynn Boyd, Texas singer-songwriter was raised as a child in Galveston, Texas until Hurricane Rita. He moved to the North Texas area after. A portion of his music has some influence from the ghost culture in Galveston, Texas.

George P. Mitchell, pioneer of hydraulic fracturing technology and developer of The Woodlands, Texas, was born and raised in Galveston.

Anita Martini, pioneering female sports journalist who was the first woman allowed in a major league locker room for a post-game press conference, was born in Galveston. Surfer Dorian "Doc" Paskowitz was born in Galveston.

More recently Tilman J. Fertitta, part of the Maceo bloodline, established the Landry's Restaurants corporation, which owns numerous restaurants and entertainment venues in Texas and Nevada.

Kay Bailey Hutchison was the senior senator from Texas and the first female Texas senator.

Gilbert Pena, incoming 2015 Republican member of the Texas House of Representatives from Pasadena, was born in Galveston in 1949 and lived there in early childhood.

Jonathan Pollard, who spied for Israel and was convicted in the US and sentenced to life in jail, was born in Galveston. The film and television actor Lee Patterson, a native of Vancouver, British Columbia, lived in Galveston and died there in 2007.

Rosie Vela, Fashion Model, Singer, Songwriter, Actress, Artist, born Galveston 1952

Other notable people include Matt Carpenter of the St. Louis Cardinals,Mike Evans, wide receiver for the Tampa Bay Buccaneers, 1998 Heisman Trophy runner-up and pro quarterback Michael Bishop, Pittsburgh Steelers great Casey Hampton, comedian Bill Engvall, actresses Valerie Perrine and Katherine Helmond, painter Ethel Fisher, Tina Knowles fashion designer and creator of House of Deréon, mother of Beyoncé and Solange Knowles, and Grammy award-winning R&B and Jazz legend Esther Phillips, born in Galveston in 1935