The city was the hub of Oregon's brief iron industry in the late 19th century, and is today a suburb of Portland.

The Clackamas people once occupied the land that later became Lake Oswego,[7] but diseases transmitted by European explorers and traders killed most of the natives.

[7] In 1855, the federal government forcibly relocated the remaining Clackamas people to the Grand Ronde Indian Reservation in nearby Yamhill County.

The vestiges of river landings, ferry stops, and covered bridges of this period can still be seen along this area.

The railroad's arrival was a mixed blessing; locally, it promoted residential development along its path, which enabled Oswego to grow beyond its industrial roots, but nationally, the continued expansion of the freight railroad system gave easy local access to cheaper and higher quality iron from the Great Lakes region.

The success of this industry greatly stimulated the development of Oswego, which by this time had four general stores, a bank, two barber shops, two hotels, three churches, nine saloons, a drugstore, and even an opera house.

[9] The iron industry was a vital part of a strategy designed by a few Portland financiers who strove to control all related entrepreneurial ventures in the late 19th century.

With the water needs of the smelters tailing off, the recreational potential of the lake and town was freed to develop rapidly.

[7] The Southern Pacific Railroad, which had acquired the P&WVR line at the end of the 19th century, widened it from narrow to standard gauge and in 1914 electrified it, providing rapid, clean, and quiet service between Oswego and Portland.

One of the land developers benefiting from sales by OI&S was Paul Murphy, whose Oswego Lake Country Club helped promote the new city as a place to "live where you play.

"[7] Murphy was instrumental in developing the first water system to supply the western reaches of the city, and also played a key role in encouraging the design of fine homes in the 1930s and 1940s that ultimately established Oswego as an attractive place to live.

[11] In 1955, a newly formed private company, Intercity Buses, Inc., began operating bus service connecting Oswego with downtown Portland and Oregon City.

[16] A 2012 article in the Daily Journal of Commerce identified Egner as a long-range planning director for the city of Lake Oswego.

[17] According to historian James W. Loewen, locals often call it "Lake No Negro" in reference to its recognition status as an "elite white suburb".

[18] In August 2020, Lake Oswego received significant media attention when its resident received an anonymous letter from neighbors asking them to take down their "Black Lives Matter" sign from the window, complaining that it lowers property values,[19][20][21] which prompted Mayor Studebaker to issue a response to this matter.

[24] That area does not include more than 1,100 acres (4.5 km2) of unincorporated land within the urban services boundary as defined by Clackamas County.

[28] Every three years, the water level in the lake is lowered several feet by opening the gates on the dam and allowing water to flow into Oswego Creek and on to the Willamette River, enabling lakefront property owners to conduct repairs on docks and boathouses.

The council consists of a mayor and six councilors, all of whom are elected at-large and serve four-year terms.

[37] Neighborhood associations play a formal role for citizen involvement in the city government's land-use planning and other activities.

include: Birdshill, Blue Heron ¤ Bryant, Evergreen, First Addition and Forest Hills, Forest Highlands, Glenmorrie, Hallinan Heights, Holly Orchard, Lake Forest, Lake Grove, Lakewood, Mary's Landing, McVey-South Shore, Mountain Park, North-Shire-County Club District, Old Town, Palisades, Rosewood, Skylands, Uplands, Waluga, Westlake, and Westridge.

[40] On August 1, 2019, the Oregon Supreme Court ruled that a 2012 Lake Oswego ordinance will need to be reviewed.