The area around Chokoloskee Bay, including the site of Everglades City, was occupied for thousands of years by Native Americans of the Glades culture, who were absorbed by the Calusa shortly before the arrival of Europeans in the New World, but by the time Florida was transferred from Spain to the United States in 1821, the area was uninhabited. A legend says that Seminoles planted potatoes along what is now the Barron River during the Seminole Wars,
in the vicinity of the present Everglades City.

American settlement began after the Civil War, when Union sympathizers who had farmed on Cape Sable to supply Key West during the war, moved up the west coast of the peninsula. The first permanent settler was William Smith Allen, who arrived on the banks of Potato Creek (later renamed the Allen River) in 1873. After Allen retired to Key West in 1889, George W. Storter, Jr. became the principal landowner in the area. Storter gained fame for his sugar cane crops. He opened a trading post in 1892, and gained a post office, called "Everglade", in 1895. Storter also began entertaining northern tourists who came to Everglade by yacht in the winter to hunt and fish. His house eventually grew into the Rod and Gun Club, visited by United States Presidents
and other notables.

The first school in Everglade was organized in 1893. The school moved into a new building in 1895, but the building was destroyed by a tornado later in the year. The next school building was washed away by the 1910 hurricane. A Methodist circuit rider began visiting Everglade in 1888, and a Methodist minister became resident the next year, but he left after four years. After that Everglade was occasionally visited by itinerant preachers of various denominations.

In 1922 Barron Collier began buying large areas of land in what was then southern Lee County. In 1923 the Florida legislature created Collier County from Lee County, with the county seat at Everglade. The town was incorporated the same year as "Everglades" (adding the "s"). The town consisted of only a dozen families at the time, but some northern sportsmen had established winter homes there.

The Tamiami Trail, which crossed Collier's domain, passed five miles north of Everglades City. While construction was proceeding on the Trail (it was completed in 1929), Collier pushed construction of what became State Road 29 from Everglades City to Immokalee, providing the town with its first land connection to the rest of the state. (*)

Today, Everglades City is famous for it’s stone crabs - it is the primary industry in the area. Stone crab season runs from October 15 - May 15 and most local restaurants and markets feature stones crabs during season.