An aboriginal group called Wu'muthkweyum, meaning "people of the grass," had a settlement near the mouth of the Fraser River that dates back to at least 3,000 years ago. At the time of first European contact, the Musqueam and Squamish peoples had villages in the areas around present-day Vancouver. There is also evidence of a third group, the Tsleil'wauthuth, ancestors of today's Burrard Band in North Vancouver. Spanish Captain Jose Maria Narvaez was the first European to explore the Strait of Georgia in 1791. In the following year, 1792, the British naval Captain George Vancouver (1757-1798) from King's Lynn in Norfolk joined the Spanish expedition based at Nootka Sound on Vancouver Island's west coast and further explored the Strait of Georgia, as well as the Puget Sound in the present day Seattle area.

Lumbering was the early industry along Burrard Inlet, now the site of Vancouver's seaport. The first sawmill began operating in 1863 at Moodyville (in 1915, renamed "North Vancouver"). The first export of lumber took place in 1865; this lumber was shipped to Australia. By 1865 the first sawmill, Stamp's Mill, started in what was to become the City of Vancouver. In 1870, the colonial government of British Columbia surveyed the community officially known as Granville. It was sited immediately west of Stamp's Mill and commonly known as Gastown, a name that survives today.

In 1885 Granville was selected by the Canadian Pacific Railway to be the western terminus of the transcontinental railway commissioned by the government of Canada under the leadership of Prime Minister Sir John A. MacDonald. The CPR selected the new name "Vancouver", in part because the existence of Vancouver Island nearby would help identify the location to easterners. On April 6, 1886, the city was incorporated under that name; the first regular transcontinental train from Montreal arrived at a temporary terminus at Port Moody in July 1886, and service to Vancouver itself began in May 1887.

A fire devastated much of the city on June 13, 1886, but with the arrival of the railway, Vancouver soon recovered and began to grow rapidly due to access to Canadian markets. Additionally, as part of the agreement to join the Confederation, British Columbia's debt of approximately $1,000,000 was paid in full by the Canadian government, creating additional business opportunities.