South Beach started as farm land. In 1870, Henry and Charles Lum purchased 165 acres for coconut farming. Charles Lum built the first house on the beach in 1886. In 1894 the Lum brothers left the island, leaving control of the plantation to John Collins, who came to South Beach two years later to survey his land. He used the land for farming purposes, discovering fresh water and extending his parcel from 14th Street to 67th in 1907.

In 1906, South Beach's first bar, Mac's Club Deuce (which still exists today), opened its door on 14th Street.

In 1912, Miami Businessmen the Lummus Brothers acquired 400 acres (1.6 km²) of Collins, in an effort build an ocean front city of modest single family residence.

Carl Fischer, a successful entrepreneur who made millions in 1909 after selling a business to Union Carbide, came to the beach in 1913. His vision was to establish South Beach as a successful city independent of Miami. This was the same year that the famous restaurant Joe's Stone Crab opened.

On March 26, 1915, Collins, Lummus, and Fisher consolidated their efforts and incorporated the Town of Miami Beach. South Beach is born. In 1918 the Mac Arthur Causeway was completed. The Lummus brothers sold their oceanfront property to the city from 6th Street to 14th, which was then and is now the area known as Lummus Park.

In 1920, the Miami Beach land boom began. South Beach's main streets, 5th Street, Alton Road, Collins Avenue, Washington Avenue, and Ocean Drive were all suitable for automobile traffic. The population was growing in the 1920s, and several millionaires such as Harvey Firestone, J.C. Penney, Harvey Stutz, Albert Champion, Frank Seiberling, and Rockwell LaGorce built homes on Miami Beach. President Warren G. Harding stayed at the Flamingo Hotel during this time, driving up interest.

In the 1930s an architectural revolution came to South Beach bringing Art Deco, Streamline Moderne, and Nautical Moderne architecture to the Beach. To this day, South Beach remains the world's largest collection of Streamline Moderne Art Deco architecture. Napier, New Zealand another notable Art Deco city, makes an interesting comparison with Miami Beach as it was rebuilt in the Ziggarut Art Deco style after being destroyed by an earthquake in 1931.

By 1940, the beach had a population of 28,000. After the December 7, 1941 attack on Pearl Harbor, the Army Air Corps took command over Miami Beach.

In 1966, South Beach became even more famous when Jackie Gleason brought his weekly variety series to the area for taping, a rarity in the industry. Beginning in the late 1970s through the 80s, South Beach was used as a retirement community with most of its ocean-front hotels and apartment buildings filled with elderly people living on small, fixed incomes. This period also saw the introduction of the "cocaine cowboys," drug dealers who used the area as a base for their illicit drug activities. The TV show Miami Vice used South Beach as a backdrop for much of its filming due to the area's raw and unique visual beauty.

While many of the unique Art Deco buildings, such as the New Yorker Hotel, were lost to developers in the years before 1980, the area was saved as a cohesive unit by Barbara Capitman and a group of activists who spearheaded the movement to place South Beach on the National Register of Historic Places.

In the late 1980s, a renaissance began in South Beach with an influx of the fashion industry moving into the area. Most major modeling agencies had offices in South Beach, and fashion photographers used the area as a backdrop for their photo shoots.