Present-day Mumbai was originally an archipelago of seven islands. Artefacts found near Kandivali, in northern Mumbai indicate that these islands had been inhabited since the Stone Age.Documented evidence of human habitation dates back to 250 BC, when it was known as Heptanesia (Ptolemy) (Ancient Greek: A Cluster of Seven Islands). In the 3rd century BCE, the islands formed part of the Maurya Empire, ruled by the Buddhist emperor, Asoka. The Hindu rulers of the Silhara Dynasty later governed the islands until 1343, when the kingdom of Gujarat annexed them. Some of the oldest edifices of the archipelago – the Elephanta Caves and the Walkeshwar temple complex date from this era.

In 1534, the Portuguese appropriated the islands from Bahadur Shah of Gujarat, naming them Bom Baia, Portuguese for "good bay". They were ceded to Charles II of England in 1661, as dowry for Catherine de Braganza. These islands, were in turn leased to the British East India Company in 1668 for a sum of £10 per annum. The company found the deep harbour on the east coast of the islands to be ideal for setting up their first port in the sub-continent. The population quickly rose from 10,000 in 1661, to 60,000 in 1675; In 1687, the British East India Company transferred its headquarters from Surat to Bombay. The city eventually became the headquarters of the Bombay Presidency.

From 1817 onwards, the city was reshaped with large civil engineering projects aimed at merging all the islands in the archipelago into a single amalgamated mass. This project, known as the Hornby Vellard, was completed by 1845, and resulted in the total area swelling to 438 .In 1853, India's first passenger railway line was established, connecting Bombay to the town of Thane. During the American Civil War (1861-1865), the city became the world's chief cotton trading market, resulting in a boom in the economy and subsequently enhancing the city's stature. The opening of the Suez Canal in 1869 transformed Bombay into one of the largest seaports on the Arabian Sea.

Over the next thirty years, the city grew into a major urban centre, spurred by an improvement in infrastructure and the construction of many of the city's institutions. The population of the city swelled to one million by 1906, making it the second largest in India after Calcutta. As capital of the Bombay Presidency, it was a major base for the Indian independence movement, with the Quit India Movement called by Mahatma Gandhi in 1942 being its most rubric event. After India's independence in 1947, it became the capital of Bombay State. In the 1950 the city expanded to its present limits by incorporating parts of Salsette island which lay to the north.

After 1955, when the State of Bombay was being reorganised along linguistic lines into the states of Maharashtra and Gujarat, there was a demand that the city be constituted as an autonomous city-state. However, the Samyukta Maharashtra movement opposed this, and insisted that Mumbai be declared the capital of Maharashtra. Following a successful protests in which 105 people were killed by police firing, Maharashtra state was formed with Mumbai as its capital on May 1, 1960

The late 1970s witnessed a construction boom and a significant influx of migrants, which saw Bombay overtake Calcutta as India’s most populous city. This has being giving rise to unrest in Marathi speaking people in Mumbai and consequently Shiv Sena,a political outfit safeguarding the rights of 'sons of soil' was formed in 1966.The city's secular fabric was torn apart in 1992, after large scale sectarian violence caused extensive loss of life and property. A few months later, on March 12, simultaneous bombings at several city landmarks by the Mumbai underworld killed around three hundred people. In 1995, the city was renamed Mumbai by the Shiv Sena party government of Maharashtra, in keeping with their policy of renaming colonial institutions after historic local appellations. In 2006, Mumbai was also the site of a major terrorist incident in which over two hundred people were killed when several bombs exploded almost simultaneously on the Mumbai Suburban Railway.