[9] Its significance is not only as an early commercial district, but additionally as one developed and dominated by German-American immigrants, merchants, and entrepreneurs, who established a strong German character on the city's southside.

Today, Fountain Square is widely considered to be Indianapolis's newest trendy neighborhood,[7] with an eclectic mix of retro architecture and modern, urban design.

[10] Fountain Square bases a portion its street pattern due to a continuation of the diagonal Virginia Avenue, which came about from the 1821 Ralston Plan for the new city of Indianapolis.

[16] After the Treaty of St. Mary's was signed on October 3, 1818, the Delaware ceded their lands in Indiana, which included a camp site at Pleasant Run, near Fountain Square's modern-day southern boundary.

[13] In 1835, Calvin Fletcher, a banker, farmer and Indiana state senator, purchased a 264-acre (107 ha) farm with Nicholas McCarty,[17] with the intent to "sell the small parcels for a 'handsome advance'".

[10][18] While the early settlement was sparsely populated and primarily residential, the areas surrounding modern-day Fountain Square saw an influx of immigrants, particularly the Irish, who settled near the railroad tracks on South Street.

In the early 1900s, Fountain Square's May Day celebration brought huge crowds into the neighborhood from all over the city to watch the parade and witness the festivities in nearby Garfield Park.

[13][23] At this time, Fountain Square was considered "downtown" for the southside areas of the city, offering multiple entertainment venues, a wide range of retail, shopping, church, and social centers.

[13][25] During the 1960s, Indianapolis, along with the rest of the United States, experienced a great amount of societal upheaval, exacerbated by white flight after construction of the Interstate Highway System enabled many Americans to leave their industrial cities for new housing and shopping options in the suburbs.

[12][17][26] In particular, the construction of the I-65 and I-70 interchanges from 1968 to 1971 had a negative effect on Fountain Square's population totals, as many of the neighborhood's multi-level flats and apartments were cleared to make way for the highway.

[25] In effect, this had cut Fountain Square's inhabitants off from downtown's social services and the adjacent neighborhoods,[13][27] further exacerbating its population decline.

[12] In 1984, the neighborhood was placed on the Indianapolis Historic Preservation Commission's list of adopted districts to focus on area rehabilitation.

[13] In the 1990s, several neighborhood community organizations joined efforts to revitalize Fountain Square's former commercial center, resulting in the opening of several new restaurants, art galleries, retail and office places, and live entertainment venues.

[17] Additional factors that have helped to cement the neighborhood's revitalization efforts are its compact and walkable streetscapes, unique building architecture, three historic district designations, its proximity to downtown, and ease of access from the interstates.

[15] Upgrades to the neighborhood's streetscape, building rehabilitation, the construction of additional public spaces, and the placement of directional signs that visually define Fountain Square have also contributed to this process.

An Indiana University Public Policy Institute report on the Cultural Trail estimated a $1 billion increase in property values along the route.