Mercer Island was first settled by non-Natives in the 1870s. It was named after early visitors, the Mercer brothers, who rowed from Seattle often for berry picking, hunting and fishing (Gellaty, 1977). The first large settlement was on the northwest side of Mercer Island, called "East Seattle." C.C. Calkins built a resort, the Calkins Hotel, in 1889 in East Seattle. This resort led to the development of a ferry dock (Calkins landing), which in turn led to a growing population. While the Calkins hotel burned to the ground in 1908, the ferry service continued, and a small business district prospered. In the 1930s, George Lightfoot began campaigning for a bridge to Seattle. The Lake Washington Floating Bridge was built in 1940, and this spurred the move of the business district to its present location near the northern end of the island.
The City of Mercer Island incorporated on July 5, 1960. It included all the land area of the island with the exception of the 70 acre (280,000 m²) business district. Just over a month later, on August 9, the business district incorporated as the Town of Mercer Island, wholly surrounded by the City. The two municipalities finally merged on May 19, 1970.
According to the United States Census Bureau, the city has a total area of 34.0 km² (13.1 mi²). 16.5 km² (6.4 mi²) of it is land and 17.4 km² (6.7 mi²) of it (51.33%) is water.
Mercer Island is the most populated island in a lake in the United States.
Mercer Island is also home to the St. Monica School(K-8), the French American School of Puget Sound (P-8), and the Northwest Yeshiva High School (9-12).
There are also several preschools on Mercer Island.
There were 8,437 households out of which 35.5% had children under the age of 18 living with them, 65.6% were married couples living together, 6.7% had a female householder with no husband present, and 25.6% were non-families. 22.1% of all households were made up of individuals and 11.2% had someone living alone who was 65 years of age or older. The average household size was 2.58 and the average family size was 3.03.
In the city the population was spread out with 26.0% under the age of 18, 4.2% from 18 to 24, 21.2% from 25 to 44, 29.9% from 45 to 64, and 18.7% who were 65 years of age or older. The median age was 44 years. For every 100 females there were 92.7 males. For every 100 females age 18 and over, there were 88.3 males.
The median income for a household in the city was $91,904, and the median income for a family was $110,830. Males had a median income of $82,855 versus $46,734 for females. The per capita income for the city was $53,799. About 1.9% of families and 3.2% of the population were below the poverty line, including 3.4% of those under age 18 and 2.3% of those age 65 or over.