The settlement was originally named "Boomerang," a construction camp for the Oregon Short Line from 1882 to 1884 at the mouth of the Payette River.

Logs were floated down the river to the sawmills at the camp to produce railroad ties.

After completion of the railroad, the settlement moved upstream to its present site and incorporated in 1891 as "Payette," to honor François Payette, a French-Canadian fur trapper and one of the first white men to explore the area.

He arrived in present-day Idaho from Astoria and was later the head of the Fort Boise trading post for the British Hudson's Bay Company from 1835 to 1844.

A large merry man, Payette was highly regarded for his helpful assistance to the many travelers who came through the fort.

As of the 2020 United States census, there were 8,127 people, 3,081 households, and 3,081 families residing in the city.

26.4% of all households were made up of individuals, and 12.3% had someone living alone who was 65 years of age or older.

25.8% of all households were made up of individuals, and 11.1% had someone living alone who was 65 years of age or older.

Payette experiences a semi-arid climate (Köppen BSk) with cold, moist winters and hot, dry summers.