No one is sure when Native Americans first lived in the Chicago region, but evidence of their presence can be traced back 10,000 years. By the late 1600s, the many tribes in the area were dominated by the Potawatomi nation. In 1673, local natives directed Canadian explorer Louis Jolliet and missionary Jacques Marquette to Lake Michigan via the Chicago River. The two learned that the Indians of the region called the area around the mouth of the river 'Checaugou,' after the wild garlic (some say onions) growing there.

After the Revolutionary War, the US increasingly focused attention on its vast western frontier. A settlement had been established on the north bank of the river by the fur trader Jean Baptiste Point du Sable in 1779. The position on Lake Michigan suited the government's plan to create a permanent presence in the area, and in 1803 Fort Dearborn was built on the south bank of the Chicago River. Chicago was incorporated as a town in 1833, with a population of 340. Within three years, land speculation rocked the local real estate market; lots that had sold for USD$ 33.00 in 1829 went for USD$ 100000.00. The boom was fuelled by the start of construction on the Illinois & Michigan Canal, an inland waterway linking the Great Lakes to the Illinois River and thus to the Mississippi River and New Orleans. The swarms of labourers drawn by the canal construction swelled Chicago's population.

The canal opened in 1848, and commercial ships began to ply the Chicago River from the Caribbean to New York. One of the city's great financial institutions, the Chicago Board of Trade, opened to handle the sale of grain by Illinois farmers, who had greatly improved access to Eastern markets thanks to the canal. Railroad construction absorbed workers freed from canal construction. By 1850, a line had been completed to serve grain farmers between Chicago and Galena, in western Illinois. A year later, the city gave the Illinois Central Railroad land for its tracks south of the city. It was the first land-grant railroad and was joined by many others, whose tracks eventually would radiate out from Chicago. The city quickly became the hub of America's freight and passenger trains, a status it would hold for the next hundred years.

Like other northern cities, Chicago profited from the Civil War, which boosted business in its burgeoning steel and tool-making industries and provided plenty of freight for the railroads and canal. In 1865, the year the war ended, an event took place that would profoundly affect the city for the next hundred years: the Union Stockyards opened on the South Side, unifying disparate meat operations scattered about the city. Chicago's rail network and the development of the iced refrigerator car meant that meat could be shipped east to New York, spurring the industry's consolidation.

On October 8, 1871, the Chicago fire started just southwest of downtown. Although the cause is now debated, the results were devastating. The fire burned for three days, killing 300 people, destroying 18,000 buildings and leaving 90,000 people homeless. 'By morning 100,000 people will be without food and shelter. Can you help us?' was the message sent east by Mayor Roswell B Mason as Chicago and City Hall literally burned down around him. Mason later earned kudos for his skillful handling of the city's recovery. His best move was to prevent the aldermen on the city council from getting their hands on the millions of dollars in relief funds that Easterners had donated after the mayor's fireside plea, thus ensuring that the money actually reached the people living in the rubble.