The town of Monterey was established in 1770 by Father Junípero Serra and Gaspar de Portolà, and served as the capital of California from 1777 to 1849, under the flags of Spain, Mexico and Argentina. Portola erected the Presidio of Monterey to defend the port against expected Russian invasion. Father Serra eventually selected a site near the mouth of the Carmel River to construct the second of California's 21 missions, Mission Carmel, after initially founding Mission San Carlos Borromeo at the site of the present presidio Chapel in Monterey.

Monterey and the Presidio was also the site of the Battle of Monterey in 1846 during the Mexican-American War, misnamed because there was no fighting in the Battle. It was here that Commodore John D. Sloat raised the U.S. flag over the Monterey Customs House and claimed California for the United States. Three years later, the California Constitutional Convention met in Colton Hall and considered the issues in becoming a state.

On October 13, 1849, Monterey became California's first capital when it became the 31st state of the Union. In the next decade, it was whaling that brought people to Monterey. Processing plants in Monterey rendered the whales to produce oil, and immigrants began to arrive from Asia and the sea gave up its wealth to the growing fishing industry. Eventually, the whaling industry disappeared, but the sardine industry arose in its place. All kinds of people came to work here. Many were rough and tough characters, like the ones immortalized by John Steinbeck in Cannery Row and Sweet Thursday.