It is about nine miles (14 km) southeast of Allegan and the Kalamazoo River flows east to west through the city.

Otsego was established in fall of 1831 by the Samuel Foster family from Vermont,[5] called Pine Creek by its initial settlers: Giles Scott and Hull Sherwood.

On June 6, 1863, at Aaron Hilliard's house[6] Ellen G. White, a founder of the Seventh-day Adventist church, experienced a vision about health and disease, and it showed vegetarian food, as was described in Genesis 1:29, was the proper food for humankind.

[8] In the 1870s, visitors from all over the Midwest journeyed to Otsego to experience the "medicinal" waters at the Otsego Mineral Springs Bath House, which remained a regional draw until 1887 when George Bardeen's paper mill operation depleted the town's mineral springs.

In 1883, Otsego High School held its first commencement ceremony, graduating three students; a home-delivery milk route was started up in 1885; and 1886 brought the establishment of the volunteer fire department, which initially used horse-drawn water-wagons.

Edsell's Opera House was the primary entertainment venue in town for many years until the opening of the Nickelodeon (Irv Nichols's theatre venture) in 1909.

An Uncle Tom's Cabin troupe played the Opera House stage on an annual basis.

Maro the Magician, stock theater groups, minstrel shows took the opera house stage on a regular basis, with the minstrel shows led by the town's one African American resident Jim Smith.

The city's baseball park was sold to the area Catholics as a site for a church in 1890.

During the 1902 baseball season, Otsego was home to Negro league baseball great Andrew "Rube" Foster, who played for George E. Bardeen's Michigan State League white semi-professional team, the Otsego Independents, before signing on as a pitcher with the Cuban X-Giants, considered by many to be the greatest team in Negro leagues history.

On 17 April 2000, John Chapman, a local elementary teacher, petitioned the City Council to have one of the six baseball diamonds at Memorial Park renamed in Foster's honor.

Otsego was struck by a tornado in 1962, uprooting trees and wiping out electricity/telephone services for several days.