Rye's story begins in 1660, when English settlers Thomas Studwell, Peter Disbrow, and John Coe founded the community along the shores of Long Island Sound. In a detail that surprises many longtime residents, Rye and much of this stretch of Westchester were originally part of Fairfield County, Connecticut, before the New York and Connecticut border was formally settled decades later.

During the Revolutionary War, Rye's location made it contested ground, enduring raids from both Patriot and Loyalist forces as the front line shifted around it. In the 18th century, the town was also home to Founding Father John Jay, who grew up on the family estate now preserved as the Jay Heritage Center and later became the first Chief Justice of the United States.

The railroad's arrival in 1849 began Rye's transformation from farming community to suburban destination, and by the 1920s, the town had fully embraced its identity as a waterfront getaway. Rye Playland opened in 1928 along the Sound, replacing a string of private amusement parks and beach clubs that had drawn Tri-State visitors by trolley and steamship for decades. The City of Rye received its official charter in 1942, the most recent city charter granted anywhere in New York State at the time.