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Indianapolis has been the capital of the state of Indiana since 1825, as well as the center of governmental, political, economic, and cultural activity in the state.

When Indiana was admitted to the Union in 1816, Congress donated four sections of land for a state capital. Four years later the legislature approved a wilderness site near the center of the state. Surveyors platted a one-square-mile area in the middle of the congressional donation, and downtown Indianapolis is still known as the “Mile Square.” One of the surveyors had assisted in laying out the nation's capital, and the Washington influence is obvious in the 1821 plat: broad streets, diagonal avenues, and a circle (the intended location of the governor's residence) at the center of the city. Centrality in the state was the town's principal advantage; the adjacent White River proved unsuitable for navigation and early land routes were poor. Well into the 1840s, the capital remained a barely accessible village.

Railroad connections secured during the late 1840s and 1850s and considerable growth during the Civil War transformed the town into Indiana's principal urban center. By 1870 the population of Indianapolis was more than double that of its closest intrastate rival, and the capital had become the state's manufacturing and commercial leader. Continued growth was spurred during the 1890s by exploiting newly discovered natural gas fields northeast of the city. The 1890s also witnessed construction of the city's signature structure, the Indiana State Soldiers and Sailors Monument, located on the (renamed) Monument Circle in the center of the Mile Square.

The city's growth was heavily affected by immigration. During the mid-19th century, Ireland and Germany supplied most of the foreign-born residents. In 1870, when 22 percent of the capital's residents were foreign-born, almost half of the immigrant population was German and almost one third was Irish. Compared to other American urban areas, however, the city was largely bypassed by the “new” immigration from Southern and Eastern Europe during the late 19th and early 20th centuries. In 1920, the Board of Trade proclaimed Indianapolis a “100 percent American town.” While this assertion was exaggerated, it did reflect the reality that only 5 percent of the city's population was foreign-born in that year—one of the lowest rates among northern cities. The African American population grew steadily during the decades after the Civil War. Comprising only 6 percent of Indianapolis residents in 1870, blacks accounted for 11 percent of the population in 1920; by 2000, the figure stood at 25 percent. In the post–World War II decades, Indianapolis experienced an influx of new arrivals from Appalachia, and by 1970 16 percent of the population had been born in the South. At the beginning of the 21st century, Hispanic immigrants were the fastest growing ethnic group in central Indiana (accounting for 3.9 percent of the city's population in 2000).

The years of the late 19th and early 20th centuries are often considered the city's Golden Age. In addition to benefitting from the gas boom (which ended around 1900), Indianapolis became the hub of the nation's most extensive interurban railway network. Connections could be made for most of the state's major cities, and shoppers, businessmen, and sightseers arrived and departed daily. The capital also benefitted from the automobile industry. Of negligible importance in 1900, by 1920 the industry ranked second in the city in terms of number of persons employed and value of product. While Detroit assumed command of the mass market, Indianapolis was home to such elegant and costly makes as Marmon and Stutz. Even after automobile production ceased, fabricating auto parts continued as a mainstay of the city's economy until the 1980s. Completion in 1909 of the Indianapolis Motor Speedway as a testing facility led to the inauguration two years later of the Indianapolis 500-Mile Race, “The Greatest Spectacle in Racing.” The venue has recently added the Brickyard 400 (NASCAR) and the U.S. Grand Prix (Formula One) to its list of events.

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