The city is located within the Town of Port Washington, though it is politically independent.
With a natural harbor at the mouth of Sauk Creek, the city became a port on Lake Michigan, shipping and receiving various goods and materials. The city exported cord wood, barrels of wheat and rye flour, bricks, fish and hides, among other things.
In 1843 the first religious services were held by the Methodist Episcopal Church in private homes and the first Catholic Church services were held in a similar manner in 1847. The Washington Democrat was the town's first newspaper, which was started in 1847 by Flavius J. Mills. The population reached 2,500 in 1853 and continued to grow with an increase in immigrants from Germany and Luxembourg between 1853-1865.
In 1870 the city saw major improvements in transportation. Not only was the railroad approved to extend through Ozaukee County, the harbor was drastically improved. The dredging that occurred resulted in the first man-made harbor in North America.
J.M. Bostwick was instrumental in the opening of the Wisconsin Chair Factory in September 1888, the success of which was vital for the town to flourish. The Gilson Manufacturing Company started making garden tractors and tractor lawn mowers in 1894 and soon became the second largest business, after the Wisconsin Chair Factory.
From 1910 through 1935 Port Washington was the home of Paramount Records and other associated record labels. In 1940 the population was 4,046; in 1950 4,754.
Of notable maritime commerce was the Port Washington power plant run by Wisconsin Electric Power Company, better known as We Energies. In 1943 the company reportedly stated that the Port Washington Plant was "the most efficient steam power plant in the world. The coal-fired plant received shipments of coal primarily by lake boat from its beginning of service in 1935 until 2004 when the coal-fired boilers were taken out of service. The plant has since been converted to generate electricity from natural gas. The conclusion of the receipt of coal also signalled the conclusion of Port Washington as a commercial port. The harbor is now utilized almost exclusively by recreational boaters.
Port Washington has the largest collection of pre-Civil War buildings in Wisconsin several of which are on the National Register of Historic Places. The Port Washington Visitor Center, is itself a historic building known as the "Pebble House". Additionally the three story brick courthouse was built in 1854 and originally served as jail, housing for the jailer, county offices and courtrooms.
The city is located at the mouth of the Sauk Creek on Lake Michigan, and includes the 63 acre (250,000 m²) Lake Bluff Park. Its average elevation above sea level is 612 feet (187 m). Downtown Port Washington is close to the level of Lake Michigan (approximately 581 feet above sea level) and adjacent to the marina. The remainder of the city resides somewhat higher, spread across seven hills.
There were 3,244 families and 4,763 households, of which 34.0% had children under the age of 18 living with them, 57.5% were married couples living together, 7.4% had a female householder with no husband present and 31.9% were non-families. The householder lives alone in 26.3% of all households and 10.5% of householders were aged 65 or older. The average household size was 2.49 and the average family size was 3.05.
In the city the population was spread out with 6.6% under the age of 5, 74.2% aged 18 and over, and 13.2% 65 years and over. The median age was 36.7 years. The population is 50.4% female and 49.6% male.
In 1999 the median income for a household in the city was $54,402, and the median income for a family was $62,557. The per capita income for the city was $24,770. About 2.6% of families and 4.0% of the population were below the poverty line.
The Ozaukee Interurban Trail, a bike trail which follows the erstwhile interurban rail line, passes through Port Washington as it traverses Ozaukee County.
The TransPORT taxi service is available within the city and surrounding 2 mile radius.
The 1990's TV Series, Step by Step is set in Port Washington, Wisconsin but was filmed in California. Contrary to the opening credits, there is no theme park, mountains or ocean in Port Washington, Wisconsin.
In 2007, the Port Washington High School Varsity Boys Basketball team made it to the state tournament for the first time since 1936, when they won the tournament. The 2007 team finished 2nd after they beat Wisconsin Dells in the semi finals and than lost to Monroe in the championship game.