Some scholars suggest that it might be from a Roman military tower called Badalocum (in Latin, "watch the place"); others have it derive from a toponymy Badia Aggeris, possibly referring to an abbey, which over time was contracted into Badagio and later distorted into Badaglo, then Badaxio, and eventually Baggio.

In 881, a noble man called Tazone refounded the settlement in Baggio; a church dedicated to Saint Apollinaris, with a Lombard-Gothic clocktower, was built on the ruins of the Roman watchtower.

During Longobards rule, Baggio became a fara, i.e., a fortified rural community, which in 1162 reportedly granted asylum to Milanese refugees after Frederick I Barbarossa invaded the city.

In origin, its economy was largely based on agriculture; in the 15th century, when mulberry was introduced in Italy, Baggio specialized in sericulture, and hence also textile production.

In late 19th century, several adjacent towns were gradually annexed to Baggio, namely Sella Nuova, Muggiano, Quarto Cagnino, and Quinto Romano.

Baggio reached population 6,100 in 1921 (a notable growth considering the huge loss of lives caused by World War I and the 1918 Spanish flu pandemic).

In 1923, Baggio was annexed to Milan along with Affori, Chiaravalle, Crescenzago, Gorla, Precotto, Greco Milanese, Lambrate, Musocco, Niguarda, Trenno, Vigentino, and Rogoredo.

The situation has changed over time, especially as a consequence of the development and renewal of the Parco delle Cave city park, which has since become a popular leisure area for the Milanese.