Nantucket was part of Dukes County, New York until 1691, when it was transferred to the newly formed Province of Massachusetts Bay and split off to form Nantucket County. The entire area of the New York county had been purchased by Thomas Mayhew Sr. of Watertown, Massachusetts, in 1641, buying out competing land claims. The earliest English settlement began on Martha's Vineyard.

Nantucket was formerly the world's leading whaling port (and still serves as home port for a small fishing industry). Herman Melville comments on Nantucket's whaling dominance in Moby Dick, Chapter 14: "Two thirds of this terraqueous globe are the Nantucketer's. For the sea is his; he owns it, as Emperors own empires."

By the Civil War, whaling was in decline and the island suffered great economic hardships, worsened by the 1846 "Great Fire" that, fueled by whale oil and lumber, devastated the main town, burning some 36 acres. It left hundreds homeless and poverty stricken, and many people left.

As a result the island depopulated and was left under-developed and isolated until the mid-20th century. The isolation kept many of the pre-Civil War buildings intact and by the 1950s, enterprising developers began buying up large sections of the island and restoring them to create an upmarket destination for the wealthy in the Northeastern United States. This highly controlled development can be compared to neighboring Martha's Vineyard, whose development served as a model for what the developers of Nantucket were trying to avoid.

On July 25, 1956, 51 people were killed in the collision of the Italian ocean liner SS ''Andrea Doria'' with the SS ''Stockholm'' in heavy fog 45 miles south of Nantucket.

In 1977, Nantucket and Martha's Vineyard unsuccessfully attempted to secede from the Commonwealth of Massachusetts. The secession vote was sparked by a proposed change to the Massachusetts Constitution, which reduced the islands' representation in the state legislature.

On October 31, 1999, EgyptAir Flight 990, traveling from New York City to Cairo, crashed off the coast of Nantucket, killing all 217 on board.

According to the U.S. Census Bureau, Nantucket County has a total area of 786 km², 84.25% of which is water. The area of Nantucket Island proper is 123.8 km² (47.8 mi²). The triangular region of ocean between Nantucket, Martha's Vineyard and Cape Cod, is Nantucket Sound. The highest point on the island is Folger Hill which stands 109 feet above sea level. Altar Rock is a close second at a height of 108 feet above sea level.

The entire island, as well as the adjoining islands of Tuckernuck and Muskeget, comprise both the Town of Nantucket and the County of Nantucket. The main settlement, also called Nantucket, is located at the western end of Nantucket Harbor, where it opens into Nantucket Sound. Key localities on the island include Madaket, Surfside, Polpis, Wauwinet, Miacomet and Siasconset (often abbreviated as 'Sconset).