The earliest known residents of the Grimsby area were the Neutral Indians who had a large village and burial ground near the escarpment. The Neutral Indians were prosperous and  very peaceful people. By 1650 they were completely wiped out by their enemies, never meeting the Europeans who came later. In 1787, a group of about 40 Loyalist families traveled together from New Jersey to make a new life in Upper Canada. They settled on 40 Mile Creek which became the centre of the village of Grimsby. The waterfalls provided power for mills to grind grain and saw wood, while the large pond at the mouth of the creek made an ideal harbour.
Grimsby became an industrial centre in the mid-1800s. During the latter part of the 19th century, industries were developed included John Grouts foundry making state-of-the-art farm machinery, George and John Van Dyke's carriage shops, and Hugh Walker’s many enterprises involving stoves, hospital furniture and metal goods. During the same period of time, fruit-growing became an important part of Grimsby's economy, and for nearly 100 years, the fruit-growing and canning industries were dominant. By the 21st century, Grimsby had become a residential community. Grimsby was considered one of the major beauty spots of the Niagara Region. The actual town of Grimsby was founded in 1790 but was originally named Township Number 6 and then The Forty, after a group of United Empire Loyalists who settled at the mouth of 40 Mile Creek in 1787. It was Robert Nelles, a politician and later lieutenant-colonel in the War of 1812, who was one of the main founders Grimsby. Nelles' home, located on Main Street West, was used for many planning sessions during the war. Then in 1816 the village became known as Grimsby, the name of the surrounding township. Canada's first Chautauqua was established in 1859 in Grimsby Park and Beach but by 1900 interest had declined and by 1909 it had ceased. The Village of Grimsby was officially incorporated in 1876 and became a town in 1922.
 

Grimsby has gone through numerous changes, first being a small rural village, then a centre for the manufacture of farm machinery, hospital furniture, furnaces and other metal products, later the hub of the Niagara Peninsula's fruit-growing industry. For many years, Grimsby also had a successful fishing industry which lasted until the 1960s. The Town of Grimsby and the Township of North Grimsby were amalgamated in 1970 with the formation of the Regional Municipality of Niagara. With a number of wineries and distilleries, Grimsby now serves as the starting point for touring the Niagara wine region.
Grimsby Beach was once a major holiday resort. Grimsby Park started in 1846 as a park for the Hamilton district of the Methodist Church. In 1910, the park's new owner, Harry Wylie, modernized the park with carousels, a motion picture theater, and a "Figure 8" roller coaster. Canada Steamship Lines bought out the park in 1916, but the park declined through the 1920s, mainly due to multiple fires that consumed many of the wooden buildings. Operations continued until 1949, with attractions gradually closing and developers buying land to build houses.
Grimsby has experienced significant growth over the past decade as the midpoint between Hamilton and St. Catharines. In early 2011, Grimsby is expected to be the home of the West Niagara YMCA. Growth is limited by the natural boundaries of Lake Ontario and the Niagara Escarpment and has almost come to a stop as a result of the Greenbelt Plan which has permanently frozen Grimsby's Urban Boundary. Some residents of Grimsby feel that development is detrimental to Grimsby as orchards close to Grimsby centre are used for residential development. however, most of the orchards in Grimsby were replaced by houses between the 1950s and 1980s and very few orchards remain.