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Austin, Travis County and Williamson County have been the site of human habitation since at least 9200 BC. The area's earliest known inhabitants lived during the late Pleistocene (Ice Age) and are linked to the Clovis culture around 9200 BC (over 11,200 years ago), based on evidence found throughout the area and documented at the much-studied Gault Site, midway between Georgetown and Fort Hood.^{[failed verification]}

When settlers arrived from Europe, the Tonkawa tribe inhabited the area. The Comanches and Lipan Apaches were also known to travel through the area. Spanish colonists, including the Espinosa-Olivares-Aguirre expedition, traveled through the area, though few permanent settlements were created for some time. In 1730, three missions from East Texas were combined and reestablished as one mission on the south side of the Colorado River, in what is now Zilker Park, in Austin. The mission was in this area for only about seven months, and then was moved to San Antonio de Béxar and split into three missions.

During the 1830s, pioneers began to settle the area in central Austin along the Colorado River. Spanish forts were established in what are now Bastrop and San Marcos. Following Mexico's independence, new settlements were established in Central Texas, but growth in the region was stagnant because of conflicts with the regional Native Americans.

In 1835–1836, Texans fought and won independence from Mexico. Texas thus became an independent country with its own president, congress, and monetary system. After Vice President Mirabeau B. Lamar visited the area during a buffalo-hunting expedition between 1837 and 1838, he proposed that the republic's capital, then in Houston, be relocated to the area situated on the north bank of the Colorado River (near the present-day Congress Avenue Bridge). In 1839, the site was chosen to replace Houston as the capital of the Republic of Texas and was incorporated under the name "Waterloo". Shortly afterward, the name was changed to Austin in honor of Stephen F. Austin, the "Father of Texas" and the republic's first secretary of state. The city grew throughout the 19th century and became a center for government and education with the construction of the Texas State Capitol and the University of Texas at Austin. After a severe lull in economic growth from the Great Depression, Austin resumed its steady development.

In 1839, the Texas Congress formed a commission to seek a site for a new capital to be named for Stephen F. Austin. Mirabeau B. Lamar, second president of the newly formed Republic of Texas, advised the commissioners to investigate the area named Waterloo, noting the area's hills, waterways, and pleasant surroundings. Waterloo was selected, and "Austin" was chosen as the town's new name. The location was seen as a convenient crossroads for trade routes between Santa Fe and Galveston Bay, as well as routes between northern Mexico and the Red River.

Edwin Waller was picked by Lamar to survey the village and draft a plan laying out the new capital. The original site was narrowed to 640 acres (260 ha) that fronted the Colorado River between two creeks, Shoal Creek and Waller Creek, which was later named in his honor. Waller and a team of surveyors developed Austin's first city plan, commonly known as the Waller Plan, dividing the site into a 14-block grid plan bisected by a broad north–south thoroughfare, Congress Avenue, running up from the river to Capital Square, where the new Texas State Capitol was to be constructed. A temporary one-story capitol was erected on the corner of Colorado and 8th Streets. On August 1, 1839, the first auction of 217 out of 306 lots total was held. The Waller Plan designed and surveyed now forms the basis of downtown Austin.

In 1840, a series of conflicts between the Texas Rangers and the Comanches, known as the Council House Fight and the Battle of Plum Creek, pushed the Comanches westward, mostly ending conflicts in Central Texas. Settlement in the area began to expand quickly. Travis County was established in 1840, and the surrounding counties were mostly established within the next two decades.

Initially, the new capital thrived but Lamar's political enemy, Sam Houston, used two Mexican army incursions to San Antonio as an excuse to move the government. Sam Houston fought bitterly against Lamar's decision to establish the capital in such a remote wilderness. The men and women who traveled mainly from Houston to conduct government business were intensely disappointed as well. By 1840, the population had risen to 856, of whom nearly half fled from Austin when Congress recessed. The resident African American population listed in January of this same year was 176. The fear of Austin's proximity to the Indians and Mexico, which still considered Texas a part of their land, created an immense motive for Sam Houston, the first and third President of the Republic of Texas, to relocate the capital once again in 1841. Upon threats of Mexican troops in Texas, Houston raided the Land Office to transfer all official documents to Houston for safe keeping in what was later known as the Archive War, but the people of Austin would not allow this unaccompanied decision to be executed. The documents stayed, but the capital would temporarily move from Austin to Houston to Washington-on-the-Brazos. Without the governmental body, Austin's population declined to a low of only a few hundred people throughout the early 1840s. The voting by the fourth President of the Republic, Anson Jones, and Congress, who reconvened in Austin in 1845, settled the issue to keep Austin the seat of government, as well as annex the Republic of Texas into the United States.

In 1860, 38% of Travis County residents were slaves. In 1861, with the outbreak of the American Civil War, voters in Austin and other Central Texas communities voted against secession. However, as the war progressed and fears of attack by Union forces increased, Austin contributed hundreds of men to the Confederate forces. The African American population of Austin swelled dramatically after the enforcement of the Emancipation Proclamation in Texas by Union General Gordon Granger at Galveston, in an event commemorated as Juneteenth. Black communities such as Wheatville, Pleasant Hill, and Clarksville were established, with Clarksville being the oldest surviving freedomtown ‒ the original post-Civil War settlements founded by former African-American slaves ‒ west of the Mississippi River. In 1870, blacks made up 36.5% of Austin's population.

The postwar period saw dramatic population and economic growth. The opening of the Houston and Texas Central Railway (H&TC) in 1871 turned Austin into the major trading center for the region, with the ability to transport both cotton and cattle. The Missouri, Kansas & Texas (MKT) line followed close behind. Austin was also the terminus of the southernmost leg of the Chisholm Trail, and "drovers" pushed cattle north to the railroad. Cotton was one of the few crops produced locally for export, and a cotton gin engine was located downtown near the trains for "ginning" cotton of its seeds and turning the product into bales for shipment. However, as other new railroads were built through the region in the 1870s, Austin began to lose its primacy in trade to the surrounding communities. In addition, the areas east of Austin took over cattle and cotton production from Austin, especially in towns like Hutto and Taylor that sit over the blackland prairie, with its deep, rich soils for producing cotton and hay.

In September 1881, Austin public schools held their first classes. The same year, Tillotson Collegiate and Normal Institute (now part of Huston–Tillotson University) opened its doors. The University of Texas held its first classes in 1883, although classes had been held in the original wooden state capitol for four years before.

During the 1880s, Austin gained new prominence as the state capitol building was completed in 1888 and claimed as the seventh largest building in the world. In the late 19th century, Austin expanded its city limits to more than three times its former area, and the first granite dam was built on the Colorado River to power a new street car line and the new "moon towers". The first dam washed away in a flood on April 7, 1900.

In the 1920s and 1930s, Austin launched a series of civic development and beautification projects that created much of the city's infrastructure and many of its parks. In addition, the state legislature established the Lower Colorado River Authority (LCRA) that, along with the city of Austin, created the system of dams along the Colorado River to form the Highland Lakes. These projects were enabled in large part because the Public Works Administration provided Austin with greater funding for municipal construction projects than other Texas cities.

During the early twentieth century, a three-way system of social segregation emerged in Austin, with Anglos, African Americans and Mexicans being separated by custom or law in most aspects of life, including housing, health care, and education. Many of the municipal improvement programs initiated during this period—such as the construction of new roads, schools, and hospitals—were deliberately designed to institutionalize this system of segregation. Deed restrictions also played an important role in residential segregation. After 1935 most housing deeds prohibited African Americans (and sometimes other nonwhite groups) from using land. Combined with the system of segregated public services, racial segregation increased in Austin during the first half of the twentieth century, with African Americans and Mexicans experiencing high levels of discrimination and social marginalization.

In 1940, the destroyed granite dam on the Colorado River was finally replaced by a hollow concrete dam that formed Lake McDonald (now called Lake Austin) and which has withstood all floods since. In addition, the much larger Mansfield Dam was built by the LCRA upstream of Austin to form Lake Travis, a flood-control reservoir. In the early 20th century, the Texas Oil Boom took hold, creating tremendous economic opportunities in Southeast Texas and North Texas. The growth generated by this boom largely passed by Austin at first, with the city slipping from fourth largest to 10th largest in Texas between 1880 and 1920.

After the mid-20th century, Austin became established as one of Texas' major metropolitan centers. In 1970, the U.S. Census Bureau reported Austin's population as 14.5% Hispanic, 11.9% black, and 73.4% non-Hispanic white. In the late 20th century, Austin emerged as an important high tech center for semiconductors and software. The University of Texas at Austin emerged as a major university.

The 1970s saw Austin's emergence in the national music scene, with local artists such as Willie Nelson, Asleep at the Wheel, and Stevie Ray Vaughan and iconic music venues such as the Armadillo World Headquarters. Over time, the long-running television program Austin City Limits, its namesake Austin City Limits Festival, and the South by Southwest music festival solidified the city's place in the music industry.

According to the 2010 United States Census, the racial composition of Austin was 68.3% White (48.7% non-Hispanic whites), 35.1% Hispanic or Latino (29.1% Mexican, 0.5% Puerto Rican, 0.4% Cuban, 5.1% Other), 8.1% African American, 6.3% Asian (1.9% Indian, 1.5% Chinese, 1.0% Vietnamese, 0.7% Korean, 0.3% Filipino, 0.2% Japanese, 0.8% Other), 0.9% American Indian, 0.1% Native Hawaiian and Other Pacific Islander, and 3.4% two or more races.

At the 2000 United States Census, there were 656,562 people, 265,649 households, and 141,590 families residing in the city (roughly comparable in size to San Francisco, Leeds, UK; and Ottawa, Ontario, Canada). The population density was 2,610.4 inhabitants per square mile (1,007.9/km²). There were 276,842 housing units at an average density of 1,100.7 per square mile (425.0/km²). There were 265,648 households, out of which 26.8% had children under the age of 18 living with them, 38.1% were married couples living together, 10.8% had a female householder with no husband present, and 46.7% were non-families. 32.8% of all households were made up of individuals, and 4.6% had someone living alone who was 65 years of age or older. The average household size was 2.40 and the average family size was 3.14.

In the city, the population was spread out, with 22.5% under the age of 18, 16.6% from 18 to 24, 37.1% from 25 to 44, 17.1% from 45 to 64, and 6.7% who were 65 years of age or older. The median age was 30 years. For every 100 females, there were 105.8 males.

The median income for a household in the city was US$42,689, and the median income for a family was $54,091. Males had a median income of $35,545 vs. $30,046 for females. The per capita income for the city was $24,163. About 9.1% of families and 14.4% of the population were below the poverty line, including 16.5% of those under age 18 and 8.7% of those age 65 or over. The median house price was $185,906 in 2009, and it has increased every year since 2004.^{[needs update]} The median value of a house in which the owner occupies it was $227,800 in 2014, which is higher than the average American home value of $175,700.

A 2014 University of Texas study stated that Austin was the only U.S. city with a fast growth rate between 2000 and 2010 with a net loss in African Americans. As of 2014, Austin's African American and non-Hispanic white percentage share of the total population is declining despite the actual number of both ethnic groups increasing. Austin's non-Hispanic white population first dropped below 50% in 2005. The rapid growth of the Latino or Hispanic and Asian populations have outpaced all other ethnic groups in the city.

According to a survey completed in 2014 by Gallup, it is estimated that 5.3% of residents in the Austin metropolitan area identify as lesbian, gay, bisexual, or transgender. The Austin metropolitan area had the third-highest rate in the nation.

According to Sperling's BestPlaces, 52.4% of Austin's population are religious. The majority of Austinites identified themselves as Christians, about 25.2% of whom claimed affiliation with the Catholic Church, owing in part to Spanish colonialism in the region. The city's Catholic population is served by the Roman Catholic Diocese of Austin, headquartered at the Cathedral of Saint Mary. Nationwide, 23% of Americans identified as Catholic in 2016. Other significant Christian groups in Austin include Baptists (8.7%), followed by Methodists (4.3%), Latter-Day Saints (1.5%), Episcopalians or Anglicans (1.0%), Lutherans (0.8%), Presbyterians (0.6%), Pentecostals (0.3%), and other Christians such as the Disciples of Christ and Eastern Orthodox Church (7.1%). The second largest religion Austinites identify with is Islam (1.7%); roughly 0.8% of Americans nationwide claimed affiliation with the Islamic faith. The dominant branch of Islam is Sunni Islam. Established in 1977, the largest mosque in Austin is the Islamic Center of Greater Austin. The community is affiliated with the Islamic Society of North America. The same study says that eastern faiths including Buddhism, Sikhism, and Hinduism made up 0.9% of the city's religious population. Several Hindu temples exist in the Austin Metropolitan area with the most notable one being Radha Madhav Dham. Judaism forms less than 0.1% of the religious demographic in Austin, although Orthodox, Reform, and Conservative congregations exist. In addition to those religious groups, Austin is also home to an active secular humanist community, hosting nationwide television shows and charity work.

As of 2019, there were 2,255 individuals experiencing homelessness in Travis County. Of those, 1,169 were sheltered and 1,086 were unsheltered. In September 2019, the Austin City Council approved $62.7 million for programs aimed at homelessness, which includes housing displacement prevention, crisis mitigation, and affordable housing; the city council also earmarked $500,000 for crisis services and encampment cleanups.

In June 2019, following a federal court ruling on homelessness sleeping in public, the Austin City Council lifted a 25-year-old ban on camping, sitting, or lying down in public unless doing so causes an obstruction. The resolution also included the approval of a new housing-focused shelter in South Austin. In early October 2019, Texas Governor Greg Abbott sent a letter to Mayor Steve Adler threatening to deploy state resources to combat the camping ban repeal. On October 17, 2019, the City Council revised the camping ordinance, which imposed increased restrictions on sidewalk camping. In November 2019, the State of Texas opened a temporary homeless encampment on a former vehicle storage yard owned by the Texas Department of Transportation.