The presence of prehistoric people in the Cedar City area is revealed by rock art found in Parowan Gap to the north and Fremont sites dated to AD 1000 and 1300. Ancestors of the present-day southern Paiute Indians met the Dominguez-Escalante Expedition in this area in 1776. Fifty years later, in 1826, mountain man and fur trader Jedediah Smith traveled through the area exploring a route from Utah to California.

Cedar City was originally settled in late 1851 by Mormon pioneers originating from Parowan, Utah, who were sent to build an iron works. The site, known as "Fort Cedar" or "Cedar City," was equidistant from vast iron deposits 10 miles (16 km) west and coal resources 10 miles (16 km) up Cedar Canyon, but was named after the abundant local trees (which are actually Junipers instead of Cedar). Two companies of men led by Henry Lunt reached the fort site in a blizzard on 11 Nov. 1851, making that date the official founding. In 1855, a new site, closer to the iron works and out of the flood plain of Coal Creek, was established at the suggestion of Brigham Young; present day Cedar City is located at this site.

The iron works closed in 1858, though iron mining continued in the area until the 1980s. The completion of a railroad connection to Cedar City in 1923 established the area as a tourism gateway to nearby Bryce Canyon National Park, Zion National Park, and Grand Canyon National Park, in addition to Cedar Breaks National Monument. Cedar City continues to be a center of tourism, commercial development, education and the arts in southwestern Utah.

The city has shared in the rapid growth of much of Southwestern Utah since the late 1980s.