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It is not exactly known when these islands were first inhabited.Pleistocene sediments found along the coastal areas around Kandivali in northern Mumbai suggest that the islands were inhabited since the South Asian Stone Age.

On , 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 English Empire, as part of Catherine's dowry to Charles.Between the second century BCE and ninth century CE, the islands came under the control of successive indigenous dynasties: Satavahanas, Western Satraps, Abhira, Vakataka, Kalachuris, Konkan Mauryas, Kadambas, Chalukyas and Rashtrakutas, The Delhi Sultanate annexed the islands in 1347–48 and controlled it until 1407.During this time, the islands were administered by the Muslim Governors of Gujarat, who were appointed by the Delhi Sultanate.However, Salsette, Bassein, Mazagaon, Parel, Worli, Sion, Dharavi, and Wadala still remained under Portuguese possession.From 1665 to 1666, the English managed to acquire Mahim, Sion, Dharavi, and Wadala.Michael's Church at Mahim (1534), The Portuguese also built several fortifications around the city like the Bombay Castle, Castella de Aguada (Castelo da Aguada or Bandra Fort), and Madh Fort.

The English were in constant struggle with the Portuguese vying for hegemony over Bombay, as they recognised its strategic natural harbour and its natural isolation from land-attacks.

Upon India's independence 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.

Growing apprehensive of the power of the Mughal emperor Humayun, Sultan Bahadur Shah of Gujarat was obliged to sign the Treaty of Bassein with the Portuguese Empire 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 city houses important financial institutions such as the Reserve Bank of India, the Bombay Stock Exchange, the National Stock Exchange of India, the SEBI and the corporate headquarters of numerous Indian companies and multinational corporations.