Its name is derived from Amstellerdam, indicative of the city's origin: a dam in the river Amstel. Settled as a small fishing village in the late 12th century, Amsterdam became one of the most important ports in the world during the Dutch Golden Age, a result of its innovative developments in trade. During that time, the city was the leading centre for finance and diamonds. In the 19th and 20th centuries, the city expanded, and many new neighbourhoods and suburbs were formed. The 17th-century canals of Amsterdam (in Dutch: 'Grachtengordel'), located in the heart of Amsterdam, were added to the UNESCO World Heritage List in July 2010.

The city is the financial and cultural capital of the Netherlands. Many large Dutch institutions have their headquarters there, and 7 of the world's top 500 companies, including Philips and ING, are based in the city. In 2010, Amsterdam was ranked 13th globally on quality of living by Mercer, and previously ranked 3rd in innovation by 2thinknow in the Innovation Cities Index 2009.

The Amsterdam Stock Exchange, the oldest stock exchange in the world, is located in the city centre. Amsterdam's main attractions, including its historic canals, the Rijksmuseum, the Van Gogh Museum, Stedelijk Museum, Hermitage Amsterdam, Anne Frank House, its red-light district, and its many cannabis coffee shops draw more than 3.66 million international visitors annually.

The earliest recorded use of the name "Amsterdam" is from a certificate dated 27 October 1275, when the inhabitants, who had built a bridge with a dam across the Amstel, were exempted from paying a bridge toll by Count Floris V. The certificate describes the inhabitants as homines manentes apud Amestelledamme (people living near Amestelledamme). By 1327, the name had developed into Aemsterdam. Amsterdam's founding is relatively recent compared with much older Dutch cities such as Nijmegen, Rotterdam, and Utrecht. In October 2008, historical geographer Chris de Bont suggested that the land around Amsterdam was being reclaimed as early as the late 10th century. This does not necessarily mean that there was already a settlement then since reclamation of land may not have been for farming—it may have been for peat, used as fuel.

Amsterdam was granted city rights in either 1300 or 1306. From the 14th century on, Amsterdam flourished, largely because of trade with the Hanseatic League. In 1345, an alleged Eucharistic miracle in the Kalverstraat rendered the city an important place of pilgrimage until the adoption of the Protestant faith. The Stille Omgang—a silent procession in civil attire—is today a remnant of the rich pilgrimage history.

In the 16th century, the Dutch rebelled against Philip II of Spain and his successors. The main reasons for the uprising were the imposition of new taxes, the tenth penny, and the religious persecution of Protestants by the Spanish Inquisition. The revolt escalated into the Eighty Years' War, which ultimately led to Dutch independence. Strongly pushed by Dutch Revolt leader William the Silent, the Dutch Republic became known for its relative religious tolerance. Jews from the Iberian Peninsula, Huguenots from France, prosperous merchants and printers from Flanders, and economic and religious refugees from the Spanish-controlled parts of the Low Countries found safety in Amsterdam. The influx of Flemish printers and the city's intellectual tolerance made Amsterdam a centre for the European free press.

The 17th century is considered Amsterdam's Golden Age, during which it became the wealthiest city in the world. Ships sailed from Amsterdam to the Baltic Sea, North America, and Africa, as well as present-day Indonesia, India, Sri Lanka, and Brazil, forming the basis of a worldwide trading network. Amsterdam's merchants had the largest share in both the Dutch East India Company and the Dutch West India Company. These companies acquired overseas possessions that later became Dutch colonies. Amsterdam was Europe's most important point for the shipment of goods and was the leading Financial Centre of the world. In 1602, the Amsterdam office of the Dutch East India Company became the world's first stock exchange by trading in its own shares.

Amsterdam lost over 10% of its population to plague in 1623–1625, and again in 1635–1636, 1655, and 1664. Nevertheless, the population of Amsterdam rose in the 17th century (largely through immigration) from 50,000 to 200,000.

Amsterdam's prosperity declined during the 18th and early 19th centuries. The wars of the Dutch Republic with England and France took their toll on Amsterdam. During the Napoleonic Wars, Amsterdam's significance reached its lowest point, with Holland being absorbed into the French Empire. However, the later establishment of the United Kingdom of the Netherlands in 1815 marked a turning point.

The end of the 19th century is sometimes called Amsterdam's second Golden Age. New museums, a train station, and the Concertgebouw were built; in this same time, the Industrial Revolution reached the city. The Amsterdam-Rhine Canal was dug to give Amsterdam a direct connection to the Rhine, and the North Sea Canal was dug to give the port a shorter connection to the North Sea. Both projects dramatically improved commerce with the rest of Europe and the world. In 1906, Joseph Conrad gave a brief description of Amsterdam as seen from the seaside, in The Mirror of the Sea. Shortly before the First World War, the city began expanding, and new suburbs were built. Even though the Netherlands remained neutral in this war, Amsterdam suffered a food shortage, and heating fuel became scarce. The shortages sparked riots in which several people were killed. These riots are known as the Aardappeloproer (Potato rebellion). People started looting stores and warehouses in order to get supplies, mainly food.