The city name comes from the Detroit River (French: le détroit du Lac Érie), meaning the strait of Lake Erie, linking Lake Huron and Lake Erie; in the historical context, the strait included Lake St. Clair and the St. Clair River.[16] Traveling up the Detroit River on the ship Le Griffon (owned by La Salle), Father Louis Hennepin noted the north bank of the river as an ideal location for a settlement.
There, in 1701, the French officer Antoine de la Mothe Cadillac, along with fifty-one additional French-Canadians, founded a settlement called Fort Ponchartrain du Détroit, naming it after the comte de Pontchartrain, Minister of Marine under Louis XIV. France offered free land to attract families to Detroit, which grew to 800 people in 1765, the largest city between Montreal and New Orleans.

Francois Marie Picoté, sieur de Belestre (Montreal 1719–1793) was the last French military commander at Fort Detroit (1758–1760), surrendering the fort on November 29, 1760 to the British. The region's fur trade was an important economic activity. Detroit's city flag reflects this French heritage. (See Flag of Detroit, Michigan).

During the French and Indian War (1760), British troops gained control and shortened the name to Detroit. Several tribes led by Chief Pontiac, an Ottawa leader, launched Pontiac's Rebellion (1763), including a siege of Fort Detroit. Partially in response to this, the British Royal Proclamation of 1763 included restrictions on white settlement in unceded Indian territories. Detroit passed to the United States under the Jay Treaty (1796). In 1805, fire destroyed most of the settlement. A river warehouse and brick chimneys of the wooden homes were the sole structures to survive.

Detroit in the 1880s.

From 1805 to 1847, Detroit was the capital of Michigan. As the city expanded, the street layout plan developed by Augustus B. Woodward, Chief Justice of the Michigan Territory was followed. Detroit fell to British troops during the War of 1812 in the Siege of Detroit, was recaptured by the United States in 1813 and incorporated as a city in 1815.

Prior to the American Civil War, the city's access to the Canadian border made it a key stop along the underground railroad.[20] Then a Lieutenant, the future president Ulysses S. Grant was stationed in the city. His dwelling is still at the Michigan State Fairgrounds. Because of this local sentiment, many Detroiters volunteered to fight during the American Civil War, including the 24th Michigan Infantry Regiment (part of the legendary Iron Brigade) which fought with distinction and suffered 82% casualties at Gettysburg in 1863. Abraham Lincoln is quoted as saying Thank God for Michigan! Following the death of President Abraham Lincoln, George Armstrong Custer delivered a eulogy to the thousands gathered near Campus Martius Park. Custer led the Michigan Brigade during the American Civil War and called them the Wolverines.

During the late 1800s and early 1900s, many of the city's Gilded Age mansions and buildings arose. Detroit was referred to as the Paris of the West for its architecture, and for Washington Boulevard, recently electrified by Thomas Edison. Strategically located along the Great Lakes waterway, Detroit emerged as a transportation hub. The city had grown steadily from the 1830s with the rise of shipping, shipbuilding, and manufacturing industries. In 1896, a thriving carriage trade prompted Henry Ford to build his first automobile in a rented workshop on Mack Avenue.