Bermuda takes its name from the Spanish sea captain Juan de Bermúdez, who sighted the uninhabited islands around 1503. The Spanish did not claim the islands, but they soon became an important navigational landmark for galleons crossing the Atlantic between Spain and the New World. Since Bermuda is surrounded by dangerous reefs, nautical misadventures cast the Spanish ashore on several occasions and littered the seabed with enough booty for some people to consider scuba diving more than a recreational sport.

In 1609 Admiral Sir George Somers was en route from England with supplies for the recent British settlement at Jamestown, Virginia, when his ship, Sea Venture, was wrecked off Bermuda. Finding it a rather pleasant place to be washed up, the admiral built replacement ships of fine Bermuda cedar, sailed off and left a couple of men behind to establish a British claim to the islands. The experience of these temporary British castaways is thought to have inspired Shakespeare to write The Tempest. Somers returned to Bermuda later that same year but died soon after arrival. The British renamed Bermuda the Somers Islands in honor of the admiral, but the name failed to stick.

The Virginia Company took a keen interest in the islands after hearing of their suitability for colonization, particularly in light of Jamestown's hostile relations with the local Indians. Only three years after Somers' misadventure, the company organized 60 settlers to establish a permanent colony on the islands. Unfortunately the islands were not as abundant as was first thought. The shallow topsoil limited agriculture and the lack of water prevented commercial crops like sugar cane from being introduced. The settlers soon became reliant on food imports from the American colonies, which they paid for by supplying sea salt secured from the Turks Islands.

For many years the Virginia Company, and then the Bermuda Company, ran the islands like a fiefdom. This wearied the settlers so much they sued to have the company's charter rescinded, and in 1684 Bermuda became a British crown colony. Slaves were first introduced in 1616, most of them brought forcibly from Africa though some were American Indians. They lived in degrading conditions but were generally employed as domestic servants or trades people rather than agricultural laborers. The skills they learnt were to stand them in good stead when slavery was abolished in 1834. At the time of emancipation 5000 of the 9000 people residing in Bermuda were registered on the census as black or 'colored.'

Despite Bermuda's reliance on trade with the American colonies, political bonds with Britain proved stronger during the American War of Independence when Bermuda remained loyal to the crown. During the War of 1812, the British Navy used Bermuda as a base from which to ransack Washington, DC. The Americans responded by confiscating the unprotected cargo of Bermuda's merchant fleet, devastating the local economy. The US Civil War proved more lucrative for the island. When the north blockaded southern ports, cotton traders employed small, fast vessels to outrun northern naval gunboats. These vessels were not capable of an Atlantic crossing, and Bermuda blossomed as a trans-shipment center on the blockade-runners' route to England. Good at picking losers, the islands short-lived prosperity collapsed with the defeat of the South.

Princess Louise, daughter of Queen Victoria, is credited with putting Bermuda on the tourist map after paying an extended visit to the islands in 1883. The princess was the wife of the Governor General of Canada and was keen to escape the long Canadian winter. By the turn of the century, Bermuda was well on the way to becoming a fashionable winter destination for 'snow birds,' who flocked aboard steamers crossing regularly from New York to Hamilton.