[6] Petoskey sits directly across the bay from Harbor Springs, another Emmet County city.

After the 1836 Treaty of Washington, Odawa Chief Ignatius Petosega (1787–1885) took the opportunity to purchase lands near the Bear River.

Petosega's father was Antoine Carre, a French Canadian fur trader and his mother was Odawa.

[11] Andrew Porter, a Presbyterian missionary, arrived at the village of Bear River (as it was then called) in 1852.

[12][13] Amos Fox and Hirem Obed Rose were pioneer entrepreneurs who had made money during both the California Gold Rush and at Northport selling lumber and goods to passing ships.

Rose also earned income as part of a business partnership that extended the railroad from Walton Junction to Traverse City.

Rose, along with Archibald Buttars,[17] established a general merchandise business in Petoskey.

[19] When the Grand Rapids and Indiana Railroad was about to be extended into the Bay View area, Rose purchased much land in that area, as well as trolley cars, to enable transport between Petoskey and Bay View.

[20] Rose also developed the first general store, extensive lime quarries (Michigan Limestone Company, aka Petoskey Lime Company;[21]),[22] building the Arlington Hotel, and lumbering enterprises, and harbor improvements in 1893.

[28] A state historical marker memorializes these events, including the last great nesting of the passenger pigeons at Crooked Lake in 1878.

Historically, the Pennsylvania Railroad's Northern Arrow, the Pere Marquette Railway's Resort Special and other trains provided passenger traffic to Petoskey and Bay View, Michigan from as far as Chicago, St. Louis, Cincinnati and Detroit but these were discontinued in the late 20th century.

[48] The city’s proximity to Lake Michigan results in significant seasonal lag, with August and February being the hottest and coldest months respectively.

Petoskey and the surrounding area are notable in 20th-century U.S. literature as the setting of several of the Nick Adams stories[51][52] written by Ernest Hemingway, who spent his childhood summers on nearby Walloon Lake.

[53] They are the setting for certain events in Jeffrey Eugenides' 2002 novel Middlesex, which also features Detroit and its suburban areas.

The movie, Beside Still Waters, directed by co-screenwriter Chris Lowell, was filmed in Petoskey in 2012.