Historically, there was an extensive riparian zone which provided habitat for millions of migrating birds, and the river had one of the southernmost runs of chinook salmon in North America.

Miwok and Paiute people lived along the river for thousands of years before Spanish and Mexican military expeditions passed through in the early 19th century.

A railroad was built along the Merced canyon, enabling mining and logging in the upper watershed, and later carrying tourists to Yosemite National Park.

Large-scale irrigation was introduced to the San Joaquin Valley in the late 19th century, and led to the construction of numerous state, federal and privately owned dams, which blocked migrating salmon and caused a large decline in riparian habitat.

Efforts to mitigate environmental damage include habitat conservation work, re-establishment of historic streamflow patterns, and the construction of a salmon hatchery.

The course of the Merced then turns to the north west and flows through a steep walled canyon for 2.5 miles (4.0 km) where the river receives the Red Peak Fork and then collects into Washburn Lake, 7,612 feet (2,320 m) above sea level.

The river then turns generally westward for another 3 miles (4.8 km), where it snakes through a spectacular narrow gorge between massive, glacially resistant granite cliffs.

Below New Exchequer, the river flows west through a heavily irrigated region of the Central Valley, passing through McSwain and Crocker-Huffman Dams and the cities of Hopeton, Delhi and Livingston.

Before irrigation started in the Central Valley and dams were constructed, the river's natural flow at the mouth was much higher than the current average of 661 cubic feet per second (18.7 m3/s), or about 479,000 acre-feet (591,000,000 m3) per year.

[12] Finally, for the gauge at Happy Isles, the largest flow ever recorded was 10,100 cubic feet per second (290 m3/s) in the 1997 Yosemite floods, which destroyed many campgrounds, roads, paths, and bridges in the valley.

Due to differences in climate, there is a large disparity between species found in the upper watershed (above Lake McClure) and along the lower river.

[14] Historically, the range of anadromous fish extended to the waterfalls at the head of Yosemite Valley, but dams have blocked their migration since the early 1900s, and diversions frequently dewater their remaining spawning habitat in the lower part of the river.

Environmental measures enacted in the late 20th century have had some success in boosting chinook salmon populations, from a record low of 500 fish during several years in the 1950s, to a high of 30,000 in 1984.

Birds that occur commonly in the middle and upper sections of the Merced River include mourning dove, Cassin's finch, California quail, dark-eyed junco, woodpecker, dipper, great blue heron, scrub jay, red-winged blackbird, red-tailed hawk, turkey vulture, cliff swallow, canyon wren, merganser, and bald eagles.

Squirrels, raccoon, jackrabbits, bats, skunks, beavers, mule deer, coyote, bobcat and black bear are among the mammal species found in the middle and upper watershed.

Intense pressure underground caused some of the Pacific Plate to melt, and the resulting upwelling magma pushed up and hardened into the granite batholith that makes up much of the Sierra Nevada.

Over millions of years, the Merced cut a deep canyon through the softer sedimentary rock, eventually hitting the hard granite beneath.

The encounter with this resilient rock layer caused the Merced River to mostly stop its downcutting, although tributary streams continued to widen the ancient canyon.

[19] Over about 80 million years, erosion caused the transportation of massive amounts of alluvial sediment to the floor of the Central Valley, where it was trapped between the California Coast Range on the west and the Sierra Nevada on the east, forming an incredibly flat and fertile land surface.

[20][21] When the last glacial period or Ice Age arrived, a series of four tremendous valley glaciers filled the upper basin of the Merced River.

These glaciers rose in branches upstream of Yosemite Valley, descending from the Merced River headwaters, Tenaya Canyon and Illilouette Creek.

Sediments of glacial origin continued to travel down the Merced River following then, helping to form the flat floor of the Central Valley.

[27] Moraga's expedition was part of a series of exploratory ventures, funded by the Spanish government, to find suitable sites for missions in the Central Valley and the Sierra Nevada foothills.

Following the gold rush, the Ahwahnechee were allowed back into Yosemite Valley, but further incidents prompted a second battalion to drive them out, this time to the Mono Lake area.

Environmental movements led by John Muir and Robert Underwood Johnson convinced the U.S. Congress to establish Yosemite National Park in 1890.

El Portal Road, constructed through Merced Canyon in 1926, put an end to passenger service on the railway, but operations continued until the mid-1940s, when major flooding occurred, destroying sections of the railroad.

Fall chinook salmon travel up a fish ladder into the hatchery's pools, which are supplied with water diverted from the Merced River.

In 2024 the New York Times reported that farmers and growers had drained significant volumes of water during the 2022 drought leaving part of the Merced dry without authorities being aware.

Classified as a "high hazard" structure, it was originally considered for inclusion on the National Register of Historic Places but was deemed too dangerous, and was subsequently removed.

There are no trails along some segments, including the lower Bridalveil Creek, upper South Fork, and specifically Tenaya Canyon, which is extremely dangerous.