The town overlooks Morro Bay, a natural embayment with an all-weather small craft commercial and recreational harbor.

At least as early as the Millingstone Horizon thousands of years before present, there was an extensive settlement along the banks and terraces above Morro Creek.

[13] The first European land exploration of Alta California, the Spanish Portolá expedition, came down Los Osos Valley and camped near today's Morro Bay on September 8, 1769.

Franciscan missionary and expedition member Juan Crespí noted in his diary that "we saw a great rock in the form of a round morro".

[14] The first recorded Filipinos to visit America arrived at Morro Bay on October 18, 1587, from the Spanish galleon Nuestra Señora de la Esperanza;[15] one of whom was killed by local Native Americans while scouting ahead.

[16] While governed by Mexico, large land grants split the surrounding area into cattle and dairy ranchos.

These ranchos needed shipping to bring in dry goods and to carry their crops, animals, and other farm products to cities.

The town of Morro Bay was founded by Franklin Riley in 1870 as a port for the export of dairy and ranch products.

The breakwater on the southwest side of the Rock was built in 1944–45 to protect the LCVPs entering and leaving the harbor.

The Pacific Gas and Electric Company built the Morro Bay Power Plant in the early 1950s, which created jobs and increased the tax base.

The city of Morro Bay is 20 km (12 mi) northwest of San Luis Obispo and is located on Highway 1.

The descriptive term morro is common to the Spanish, Portuguese, and Italian languages, and the word is part of many place names where there is a distinctive and prominent hill-shaped rock formation.

[citation needed] Morro Bay is a natural embayment with an artificial harbor constructed by the U.S. Army Corps of Engineers.

The bay extends inland and parallels the shore for a distance of about 6.4 km (4.0 mi) south of its entrance at Morro Rock.

The city is located next to the Pacific Ocean, which helps moderate temperatures and create an overall pleasant mild year-round climate, resulting in warmer winters and cooler summers compared with places farther inland, such as Atascadero.

Summers in Morro Bay are cool for a city located on the 35th parallel north latitude, with July averaging around 60 °F (16 °C).

Morro Bay High School and Del Mar Elementary offer education for grades K−5 and 9−12.

A number of tourist attractions are found along the shoreline and the streets closest to it, especially the Embarcadero, including restaurants, shops and parks.

The plant was operating at relatively low capacity factors (approximately 5%) under contract with PG&E, due primarily to economics.

[43] In 2022, TotalEnergies, a French energy company entered the joint venture with Trident Winds and took over the shares previously held by EnBW.

Vistra Corp agreed to tear down the stacks and plans to build a 600 MW lithium-ion battery installation.