European settlement in the region began in the late 17th century with a French fur trading outpost on the banks of the Kaministiquia River. It grew into an important transportation hub with its port forming an important link in the shipping of grain and other products from western Canada, through the Great Lakes and the Saint Lawrence Seaway, to the east coast. Forestry and manufacturing played important roles in the city's economy. They have declined in recent years, but have been replaced by a "knowledge economy" based on medical research and education. Thunder Bay is the site of the Thunder Bay Regional Research Institute.
The city takes its name from the immense Thunder Bay at the head of Lake Superior, known on 18th-century French maps as Baie du Tonnerre (Bay of Thunder). The city is often referred to as the "Lakehead", or "Canadian Lakehead", because of its location at the end of Great Lakes navigation on the Canadian side of the border.
European settlement at Thunder Bay began with two French fur trading posts (1683, 1717) which were subsequently abandoned (see Fort William, Ontario). In 1803, the Montreal-based North West Company established Fort William as its mid-continent entrepôt. The fort thrived until 1821 when the North West Company merged with the Hudson's Bay Company, and Fort William was no longer needed.
By the 1850s, the Province of Canada began to take an interest in its western extremity. Discovery of copper in the Keweenaw Peninsula of Michigan had prompted a national demand for mining locations on the Canadian shores of Lake Superior. In 1849, French-speaking Jesuits established the Mission de l'Immaculée-Conception (Mission of the Immaculate Conception) on the Kaministiquia to evangelize the Ojibwe. The Province of Canada negotiated the Robinson Treaty in 1850 with the Ojibwa of Lake Superior. As a result, an Indian reserve was set aside for them south of the Kaministiquia River. In 1859–60, the Department of Crown Lands surveyed two townships (Neebing and Paipoonge) and the Town Plot of Fort William for European-Canadian settlement.
Another settlement developed a few miles to the north of Fort William after construction by the federal Department of Public Works of a road connecting Lake Superior with the Red River Colony. The work was directed by Simon James Dawson (see Port Arthur, Ontario). This public works depot or construction headquarters acquired its first name in May 1870 when Colonel Garnet Wolseley named it Prince Arthur's Landing. It was renamed Port Arthur by the Canadian Pacific Railway (CPR) in May 1883.