Monaco was first mentioned by the Greek historian Hecataeus of Miletus, who referred to it as “Monoikos, a Ligurian town”. Strabo referred to it as Monoikon limen, explaining that Monoikos (Greek for "the solitary one") was another name for Heracles, who had a temple here; it is possible, however, that it is an alteration of an older Ligurian name. In 1191, the Holy Roman Empire granted Monaco to the Genoese in return for cracking down on pirates. By the early 1200s, the Genoese had built a castle on the rock and were utilizing the port. In 1297, Francesco Grimaldi, known as “Malizia”, and his men captured the fortress protecting the Rock of Monaco while dressed as Franciscan friars. However, the Grimaldi family faced a century of struggle contesting control of Monaco with Genoa before gaining official control. In 1419, the Grimaldi family purchased Monaco from the Crown of Aragon and became the official and undisputed rulers of “the Rock of Monaco”. In 1612, Honoré II began to style himself “Prince” of Monaco.
In 1793, Revolutionary forces captured Monaco and until 1814 it was occupied by the French. The principality was reestablished in 1814 under the Grimaldis. By the Treaty of Turin in 1860, the Sardinian forces pulled out of the principality, and the surrounding towns were ceded to France. The same treaty recognised Monaco’s sovereignty. Before this time, there was unrest in Menton and Roquebrune, where the townspeople had become weary of heavy taxation by the Grimaldi family. Charles III of Monaco gave up his claim to these two towns, which were ceded to France in return for 4,100,000 francs.
In 1918, a new Franco-Monégasque Treaty was signed, providing for limited French protection over Monaco. The treaty, endorsed in 1919 by the Treaty of Versailles, established that Monégasque international policy would be aligned with French political, military and economic interests. In 1943, the Italian Army invaded and occupied Monaco, forming a fascist administration, followed by occupation by Nazi Germany. During this period, René Blum, the founder of the Ballet de l'Opéra in Monte Carlo, was arrested and later murdered at Auschwitz.
Rainier III succeeded to the throne in 1949 and ruled until 2005. On 19 April 1956, Prince Rainier married the American actress Grace Kelly, an event widely televised and covered in the popular press. A 1962 amendment to the constitution abolished capital punishment and provided for women's suffrage. In 1963, a crisis developed when Charles de Gaulle blockaded Monaco, angered by its status as a tax haven. In 1993, the Principality of Monaco became a member of the United Nations.
In 2005, Rainier III relinquished his duties to his son, Albert, and died six days later. Albert II formally assumed the princely crown on 12 July 2005. On 27 August 2015, Albert II apologised for Monaco's role during World War II in facilitating the deportation of Jews and resistance fighters.
Monaco has the world's highest nominal GDP per capita. Its economic development was spurred in the late 19th century with the opening of the state’s first casino, the Monte Carlo Casino, and a rail connection to Paris. The state retains monopolies in numerous sectors, including tobacco and the postal service. Monaco became a major banking centre and sought to diversify into the services sector and small, high-value-added, non-polluting industries. Monaco has low business taxes and does not levy personal income tax (except for French citizens). In June 2024, the Financial Action Task Force placed Monaco under increased monitoring to combat money laundering and terrorist financing.