The City of Wasilla derives its name from Chief Wasilla, a respected local Dena'ina Athabascan Indian Chief. There is some debate about the meaning of the Chief's name. One source claims it means "breath of air" in the Dena'ina Athabascan Indian dialect. Other sources assert the name descended as a variation of the Russian name "Vasili" meaning "William".

Before Anchorage was established, the settlement of Knik had served as the transport and supply hub for the region since the 1880's. With the founding of Anchorage in 1915 and the concurrent building of the Alaska Railroad as an overland supply link to Fairbanks and interior Alaska, the end was in sight for Knik.

By 1917 Knik was eclipsed by the new town of Wasilla which sprang up that year after a government land auction at the point where the Alaska Railroad crossed the main supply route (the Carl Wagon Trail) for the mines in the Willow Creek Mining District now the intersection of the George Parks Highway and Main Street. The location of Wasilla also provided a better supply staging point for the Kantishna Gold Mining area near Mount McKinley and mines in the Talkeetna area.

While placer (hydraulic) and hard rock gold mining had been underway in the Willow Creek Mining District since 1907, Wasilla prospered from its founding the 1917 until 1940 as the self proclaimed, "Gateway to the Willow Creek Mining District". With the exception of the latter part of WWII this was a very active mining area between 1909 and 1950. Incomplete records indicate at least 623,874 ounces of gold worth nearly $18 million dollars were produced at a time when gold was valued between 20-35 dollars an ounce. Over the years at least 50 mines and prospects have operated in this area and at the current time there are still a few active.

During the Great Depression of the 1930s the federal government formed the Alaska Rural Rehabilitation Corporation to set up the Matanuska Colony for the agricultural development of Alaska. This influx of 200 farming families and supporting services meant that from 1935 until the 1960s, instead of Wasilla, the town of Palmer gradually became the primary supply and service center for this region.

Palmer remained the regional commercial center until a new Glenn Highway bypassed Palmer allowing more direct travel from Wasilla to Anchorage. The subsequent development of the new George Parks Highway to Fairbanks (through Wasilla) in the early 1970s opened opportunities for the first wave of "suburbanite" settlement. This meant that with ever improving roads and business opportunities Wasilla shifted from a small town and weekend destination for people from Anchorage to a hometown for workers in Anchorage and Wasilla.

Incorporated in 1974, Wasilla's current city resident population is approximately 11, 924,  with a conservatively estimated population of 111,923 adjacent Borough residents who patronize the Wasilla business and commercial center.