In the third century BCE, the Maurya Empire transformed the seven islands of Bombay into a centre of Hindu and Buddhist culture. Then, the islands came under the control of successive indigenous empires before being ceded to Portuguese settlers and subsequently to the British East India Company. They were merged and the city was named Bombay. During the mid-18th century, it emerged as a significant trading town. Economic and educational development characterised the city during the 19th century. It became a strong base for the Indian independence movement during the early 20th century and was the epicentre of the Rowlatt Satyagraha and the Royal Indian Navy Mutiny. When India became independent in 1947, the city was incorporated into Bombay State. In 1960, following the Samyukta Maharashtra movement, a new state of Maharashtra was created with Bombay as the capital. It was renamed Mumbai in 1996.

Mumbai is the commercial and entertainment centre of India, generating 5% of India's GDP, and accounting for 25% of industrial output, 40% of maritime trade, and 70% of capital transactions to India's economy. Mumbai is home to important financial institutions such as the Reserve Bank of India, the Bombay Stock Exchange, the National Stock Exchange of India and the corporate headquarters of many Indian companies and numerous multinational corporations. The city also houses India's Hindi film and television industry, known as Bollywood. Mumbai's business opportunities, as well as its potential to offer a better standard of living, attract migrants from all over India and, in turn, make the city a potpourri of many communities and cultures.

Mumbai is built on what was once an archipelago of seven islands: Bombay Island, Parel, Mazagaon, Mahim, Colaba, Worli, and Old Woman's Island (also known as Little Colaba). Pleistocene sediments found near Kandivali in northern Mumbai by British archaeologist Todd in 1939 suggest that these islands were inhabited since the Stone Age. Their earliest known inhabitants were the Kolis, a fishing community. In the third century BCE, the islands formed part of the Maurya Empire, ruled by the Buddhist emperor, Ashoka of Magadha. Buddhist monks, scholars, and artists created the artwork, inscriptions, and sculpture of the Kanheri Caves in the mid third century BCE and Mahakali Caves.

The city then was known as Heptanesia (Ancient Greek: A Cluster of Seven Islands) to the Greek geographer Ptolemy in 150 CE. Later, between second century BCE and ninth century CE, the islands came under the control of successive indigenous dynasties: Satavahanas, Abhiras, Vakatakas, Kalachuris, Konkan Mauryas, Chalukyas and Rashtrakutas, before being ruled by the Silhara dynasty from 810 to 1260. Raja Bhimdev founded his kingdom in the region in the late 13th century and established his capital in Mahikawati (present day Mahim). He brought settlers of various communities from Saurashtra and Deccan to Mahikawati. The Muslim rulers of Gujarat annexed the islands in 1348. They were later governed by the Gujarat Sultanate from 1391 to 1534. From 1429 to 1431, the islands were a source of contention between the Gujarat Sultanate and the Bahamani Sultanate of Deccan. From 1491 to 1494, the islands suffered several sea piracies from Bahadur Khan Gilani, a nobleman of the Bahamani Sultanate.

Growing apprehensive of the power of the Mughal emperor Humayun, Sultan Bahadur Shah of the Gujarat Sultanate was obliged to sign the Treaty of Bassein with Portuguese settlers on 23 December 1534. According to the treaty, the seven islands of Bombay, the nearby strategic town of Bassein and its dependencies were offered to the Portuguese. The territories were later surrendered on 25 October 1535. The Portuguese were actively involved in the foundation and growth of their Roman Catholic religious orders in Bombay. Some of the oldest Catholic churches in the city like the St. Michael's Church at Mahim, St. John the Baptist Church at Andheri, and St. Andrew's Church at Bandra, date from the Portuguese era. On 11 May 1661, the marriage treaty of Charles II of England and Catherine of Braganza, daughter of King John IV of Portugal, placed the islands in possession of the British Empire, as part of Catherine's dowry to Charles. However, Salsette, Mazagaon, Parel, Worli, Sion, Dharavi, and Wadala still remained under Portuguese possession. From 1665 to 1666, the British managed to acquire Mahim, Sion, Dharavi, and Wadala.

These islands were in turn leased to the British East India Company in 1668 for a sum of £10 per annum by the Royal Charter of 27 March 1668. 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. Following the transfer, Bombay was placed at the head of all the Company's establishments in India. The islands suffered incursions from the Mughals in the late 17th century. In 1737, the Portuguese province of Salsette was captured by the Maratha Peshwa Baji Rao I. The British occupied the Maratha provinces of Salsette, Elephanta, Hog Island, and Karanja on 28 December 1774. Salsette, Elephanta, Hog Island, and Karanja were formally ceded to the British by the Treaty of Salbai signed between the Marathas and the British East India Company in 1782, to settle the outcome of the First Anglo-Maratha War.

From 1782 onwards, the city was reshaped with large-scale civil engineering projects aimed at merging all the seven islands into a single amalgamated mass. This project, known as the Hornby Vellard, was completed by 1784. On 16 April 1853, India's first passenger railway line was established, connecting Bombay to the neighbouring town of Thana. During the American Civil War (1861–1865), the city became the world's chief cotton trading market, resulting in a boom in the economy that subsequently enhanced the city's stature. The opening of the Suez Canal in 1869 transformed Bombay into one of the largest seaports on the Arabian Sea.

In September 1896, Bombay was hit by a bubonic plague epidemic where the death toll was estimated at 1,900 people per week. About 850,000 people fled Bombay and the textile industry was adversely affected. As the capital of the Bombay Presidency, it witnessed the Indian independence movement, with the Quit India Movement in 1942 and the The Royal Indian Navy Mutiny in 1946 being its most notable events. After India's independence in 1947, the territory of the Bombay Presidency retained by India was restructured into Bombay State. The area of Bombay State increased, after several erstwhile princely states that joined the Indian union were integrated into Bombay State. Subsequently, the city became the capital of Bombay State. In April 1950, Greater Bombay District came into existence with the merger of Bombay Suburbs and Bombay City.

In the Lok Sabha discussions in 1955, the Congress party demanded that the city be constituted as an autonomous city-state. In 1956, the States Reorganisation Committee recommended a bilingual state for Maharashtra-Gujarat with Bombay as its capital. Bombay Citizens' Committee, an advocacy group comprising of leading Gujarati industrialists lobbied for Bombay's independent status. In the 1957 elections, the Samyukta Maharashtra movement opposed these proposals, and insisted that Bombay be declared the capital of Maharashtra. Following protests by the movement in which 105 people were killed by police, Bombay State was reorganised on linguistic lines on 1 May 1960. Gujarati-speaking areas of Bombay State were partitioned into the state of Gujarat. Maharashtra State with Bombay as its capital was formed with the merger of Marathi-speaking areas of Bombay State, eight districts from Central Provinces and Berar, five districts from Hyderabad State, and numerous princely states enclosed between them.

The city's secular fabric was torn apart in the Hindu-Muslim riots of 1992–93 in which more than 1,000 people were killed. On 12 March 1993, a series of 13 co-ordinated bombings at several city landmarks by Islamic extremists and the Bombay underworld resulted in 257 deaths and over 700 injuries. In 2006, 209 people were killed and over 700 injured when seven bombs exploded on the city's commuter trains. A series of ten coordinated terrorist attacks by armed gunmen from 26 November 2008 to 29 November 2008 resulted in 173 deaths, 308 injuries, and severe damage to several important buildings.