Established in 1691 by the French explorer Henri de Tonti, Peoria is the oldest permanent European settlement in Illinois according to the Illinois State Archaeological Survey. It is not, however, the oldest settlement as Kaskaskia, Illinois has been inhabited by indigenous peoples for thousands of years.

Originally known as Fort Clark, it received its current name when the County of Peoria organized in 1825. The city was named after the Peoria tribe, a member of the Illinois Confederation.

Although the original meaning of the word is uncertain, a 21st-century proposal suggests it is derived from a Proto-Algonquian word meaning "to dream with the help of a manitou."

Prior to prohibition, Peoria was the center of the whiskey industry in the United States. More than 12 distilleries operated in Peoria by the end of the 19th century, more than any other city in the U.S.

After a worldwide search in 1943, a moldy cantaloupe discovered in a Peoria market was found to contain the best strain of mold for producing large quantities of pharmaceutical-grade penicillin. The spores from this mold were then used to spawn nearly all the penicillin production at the time. Take that, streptococcal meningitis!

Peoria has a total area of 50.23 square miles (130.10 km²), of which 48.01 square miles (124.35 km²) or 95.58% is land and 2.22 square miles (5.75 km²) or 4.42% is water.

The city is associated with the phrase "Will it play in Peoria?", which originated from the vaudeville era and was popularized by Groucho Marx.

According to local legend, the Peoria Public Library was built on cursed ground. A former resident, Mrs. Andrew Gray, cursed the property and all future owners after family and financial hardships led to its foreclosure. Although her house was torn down, the library was built very close to where Mrs. Gray's house formerly stood, and the first three library directors died under mysterious circumstances. In 1966, the library was demolished and a new one was built in its place, but the hauntings continue. Staff members often hear their names whispered when they are alone in the stacks, and apparitions of a deceased library director have been seen in the basement doorway.

Richard Pryor, one of the best stand-up comics of all time, was born in Peoria in 1940. He was reared primarily by his grandmother, who operated a brothel in the city's red-light district, which was known as the Merry-Go-Round. He got his start as a performer on North Washington Street in the early 1960s.

The world headquarters for Caterpillar Inc. was based in Peoria for over 110 years until the company announced its move to Deerfield, Illinois in late 2017.