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The history of Ocean City, New Jersey originates as a fishing camp for indigenous Lenape people, and was first observed by European navigators in the 17th century. Around 1700, John Peck used the island as a base of operations for storing whales, and the island became known as Peck's Beach after him. The first house on the island was in 1752. Cattle grazers populated the island, and the first permanent resident was Parker Miller in 1859. In 1979, four Methodist ministers established the Ocean City Association – a Christian retreat that laid out streets for cottages and businesses. The first bridge to the island opened in 1883, and a year later, the town was established as a from portions of Upper Township, following an act of the New Jersey Legislature on May 3, 1884.

19th century and earlier
Before Ocean City was established, local Native Americans set up camps on the island for fishing in the summer months. In 1633, Dutch navigator David Pietersz. de Vries referred to "flat sand beaches with low hills between Cape May and Egg Harbor", possibly the earliest reference to the island that became Ocean City. In 1695, Thomas Budd surveyed the land on behalf of the West Jersey Society. Around 1700, John Peck used the island as a base of operation for storing freshly hunted whales, and subsequently the land became known as Peck's Beach. The first record of a house on Peck's Beach was in 1752. During the 18th century, cattle grazers brought cows to the island, where plentiful trees, weeds, brush, and seagrass provided suitable condition. Parker Miller was the first resident permanent resident of Peck's Beach in 1859.

On September 10, 1879, four Methodist ministers – Ezra B. Lake, James Lake, S. Wesley Lake, and William Burrell – chose the island as a suitable spot to establish a Christian retreat and camp meeting on the order of Ocean Grove. They met under a tall cedar tree, which stands today in the lobby of the Ocean City Tabernacle. Having chosen the name "Ocean City", the founders incorporated the Ocean City Association, and laid out street and lots for cottages, hotel, and businesses. The Ocean City Tabernacle was built between Wesley and Asbury Avenues and between 5th and 6th Streets. Camp meetings were held by the following summer and continue uninterrupted to this day.

In 1880, one year after Ocean City was established as a Christian resort, regular steamboat service from Somers Point began. In 1881, the first school on the island opened. The first bridge to the island was built in 1883, and the West Jersey Railroad opened in 1884. Based on a referendum on April 30, 1884, the borough of Ocean City was formed from portions of Upper Township, following an act of the New Jersey Legislature on May 3, 1884.

In 1883, a wharf was built on the island at 4th Street along the Great Egg Harbor Bay. A series of boards on the ground extended from the wharf to the beach, from 4th Street to 7th Street. The boards were lifted from the ground each winter. By 1887, the boardwalk extended to 11th Street, where the Excursion House was located. It was the first amusement entity on the island, and was popular until it burned to the ground in 1900. In November 1888, a nor'easter destroyed the first boardwalk, but was rebuilt by the following year, and later extended to 13th Street.

In 1896, Volunteer fire Company #1 built their headquarters on the site of the current Ocean City City Hall as a wood-frame structure. In 1897, the eastern boundaries of Peck Bay and Great Egg Harbor Bay served as the boundaries of the newly established city of Ocean City. In 1898, William Shriver founded Shriver's as a restaurant and candy store, and is the oldest business on the boardwalk still in existence.

Early 1900s
In 1900, the Casino Pier opened, which extended 700 ft from the boardwalk at 9th Street, lit with 1,500 incandescent lights. At its end was the namesake casino, which was could hold 2,000 people. It was renamed Young's Pier in 1904.

The ship Sindia joined other shipwrecks on the beach on December 15, 1901, on its way to New York City from Kobe, Japan, but has since sunk below the sand. A salvage attempt to retrieve treasures believed to have been on the ship was most recently launched in the 1970s, all of which have been unsuccessful.

On April 22, 1905, Ocean City mayor Joseph G. Champion dedicated a new 2 mi (3.2 km) boardwalk. The new structure was built several hundred feet closer to the ocean and was higher off the ground, supported by spruce decking. Later in 1905, the Municipal Music Pavilion was built on Moorlyn Terrace, extending 118 ft into the ocean, and was the location of free daily concerts. In 1911, Breakers Hotel was opened. In 1915, Ocean City held its first Baby Parade,

In 1907, the Atlantic City and Shore Railroad railroad line began, which ran from Atlantic City to Ocean City via Somers Point. The bridge across the Great Egg Harbor Bay burned in 1946, and was not rebuilt; the line was discontinued in 1948.

After their 1911 election, the newly elected city commission purchased the property next to the 1896 fire house, with the intention of constructing a city hall. In April 1913, the city commission passed Ordinance #45, which authorized the costs for the new building. Then-mayor Harry Headley voiced his support, noting that Ocean City was the only town in the county without a city hall. The plan chosen by the Young Men's Progressive League was designed by architect Vivian B. Smith, AIA, in collaboration with Earle M. Henderer. On April 11, 1914, the cornerstone was laid, marking the beginning of construction. The building was completed by the end of the year at cost of $75,000, and opened to public tours on January 1, 1915. Upset at the high cost of the building, residents did not re-elect Mayor Headley amid an organized opposition campaign.

In 1914, the Ocean City Automobile Bridge Company financed the construction of a toll bridge linking Somers Point and Ocean City. In 1921, the bridge became free when it was bought by the state of New Jersey, and was entirely replaced by the World War Memorial Bridge in 1933.

In 1920, the Chamber of Commerce adopted the slogan "America's Greatest Family Resort".

1927–1950
A large fire in 1927 caused $1.5 million in damage and led the city to move the boardwalk closer to the ocean, which resulted in the greater potential for damage from saltwater. The fire destroyed Young's Pier.

In 1928, the boardwalk was rebuilt with concrete decking, the first such instance on the Jersey Shore.

Also in 1928, a bridge in northern Ocean City opened, crossing Great Egg Harbor Inlet to marshlands in Atlantic County. The bridge connecting with Somers Point was replaced by the World War Memorial Bridge in 1933.

Adjacent to the marshes of the Great Egg Harbor Bay is Ocean City Airport, officially known as Clarke Field. The airport was built in 1935 on what was previously a landfill, funded by the Works Progress Administration. The airport is still open to the public, operating at an annual loss of $150,000 for the city as of 2016.

Prohibition of alcohol
As a result of its religious origins, the sale or public drinking of alcoholic beverages in Ocean City was prohibited. In 1881, the Ocean City Association passed a set of blue laws – laws designed to enforce religious standards. The town banned the manufacturing or sale of alcohol in 1909. Promoting water instead of drinking alcohol, the Woman's Christian Temperance Union donated a public fountain, dedicated on Memorial Day in 1915. Despite the prohibition of alcohol within the municipality, illegal saloons operated within Ocean City, and in 1929, prosecutors raided 27 speakeasies.

In 1951, the town banned the consumption of alcohol on the beach, and banned all public alcohol consumption in 1958. During the campaign for a 1986 referendum to repeal the blue laws, ads in the local paper suggested that the repeal could be next. In May 2012, 68.8% of voters rejected a ballot initiative for BYOB – bring your own bottle. As of 2016, Ocean City was one of 32 dry towns in New Jersey. Despite the prohibition in the city, 18.3% of adults in Ocean City metropolitan statistical area (which includes all of Cape May County) drink alcohol heavily or binge drink, the highest percentage of any metro area in the state; USA Today listed Ocean City as the state's most drunken city on its 2017 list of "The drunkest city in every state".

21st century
In 2012, the World War Memorial Bridge, connecting Ocean City with Somers Point via New Jersey Route 52, was replaced by a wider and taller bridge.

Due to a deteriorating substructure and regular maintenance of the 85 year old boardwalk, Ocean City began a $10 million project in Fall 2013 to rebuild the walkway from 5th to 12th Streets. The project, contracted by Fred M. Schiavone Construction, replaced the concrete substructure from 1928 with 35 ft wooden pilings as support and yellow pine decking. During construction work, 12,000 yd3 of sand and debris were removed from under the boardwalk. The project included the construction of five pavilions, with potentially three more to be built. In Fall 2013, the first section from 5th to 6th Streets was replaced. Originally intended to be a seven year project, the work is two years ahead of schedule, and is scheduled to be completed in March 2018.