The name Bahamas probably comes from the Spanish "Baja Mar", meaning "shallow seas", an apt description of the area attributed to Columbus. After the European discovery of the islands in 1492, they remained a backwater until a few English settlers from Bermuda arrived on Eleuthera in 1647. Soon after, farmers colonized New Providence and established Charles Town, whose name was changed in 1690 to Nassau to honour England's new ruler, William, Prince of Orange and Nassau.

With the islands ruled by a series of incompetent royal governors, Nassau gradually slipped into chaos and piracy, becoming home to such notorious figures as Blackbeard , who preyed on Spanish and French shipping lines. Not until the arrival of Royal Governor Woodes-Rogers in 1717 was piracy finally curtailed.

During the American Revolution, many Loyalists came to the Bahamas from the North American colonies, settling in Abaco, Eleuthera, Exumas and Long Island and creating an economy and society based on plantations run by slave labour. However, their cotton and tobacco crops failed due to crop diseases and lack of demand. After the abolition of slavery here in 1834, island residents turned to salvaging, sponging, fishing and subsistence farming to make a living.

During the American Civil War, Nassau became a boomtown built on blockade running , later turning to rum-running during America's Prohibition of the 1920s and early 1930s. Tourism , popular since the mid-nineteenth century, gained a further foothold after World War II with the advent of modern air travel, air conditioning and telephones.

On July 10, 1973, after 325 years of British rule, the Bahamas became an independent, democratic state supported in large part by tourism, banking and fishing.