Budapest first appeared on the world map when the Romans founded the town of Aquincum around 89 AD, in what is today Óbuda. It soon became the capital of the province of Lower Pannonia, and the Romans even founded a proto-Pest known as Contra Aquincum on the other side of the river.

The Romans were replaced around 900 by the Magyars, who went on to found the kingdom of Hungary (Magyar Királyság). The Mongols dropped in uninvited in 1241, but the Magyars bounced back and built the Royal Castle, which still dominates Buda, in 1427.

In 1541, Buda and Pest fell to the Ottomans and stayed in the hands of the Turks until 1686, when the Austrian Habsburgs conquered the town. Now at peace, both sides of the river boomed, and after an abortive Hungarian revolution in 1848–49, the great Compromise of 1867 made Budapest the united capital of the Hungarian half of the Dual Monarchy of Austria-Hungary.

Budapest emerged from World War I battered but now the capital of an independent Hungary. Its population reached one million in 1930. Air raids and a terrible three-month siege towards the end of World War II resulted in the death over 38,000 civilians, and up to 40% of Budapest's Jewish community were murdered during the Holocaust. A total of 400,000 Jews in the area were murdered by the Nazis and their Nyilas sympathizers. Various people helped members of the local Jewish community including Raoul Wallenberg, a Swedish humanitarian sent to Hungary under a diplomatic cover, who tried to make a difference by distributing Swedish passports to as many Jews as possible, and the Italian Giorgio Perlasca, that, pretending to be a Spanish diplomat, rescued a good share of Budapest's Jewish community.

After the war, the city recovered and became a showcase for the more pragmatic policies of Hungary's hard-line Communist government. It was, however, site of the 1956 Hungarian uprising against unpopular policies such as collectivisation. The revolution against communist rule only ended when the Soviets sent in the tanks as they felt Hungary slipping out of their influence and control.

Today's Budapest is by far the wealthiest and most cosmopolitan city in Hungary and is increasingly popular with tourists. In 1987, it was inscribed for the cultural and architectural significance of the Banks of the Danube, the Buda Castle Quarter and Andrássy Avenue.