Balinese people are descendants of a prehistoric race who migrated through mainland Asia to the Indonesian archipelago, presumably first settling around 2500 BC.The end of the prehistoric period in Indonesia was marked by the arrival of Hindu people from India around 100 BC as determined by Brahmi inscriptions on potsherds. The name Balidwipa has been discovered from various inscriptions, including the Blanjong charter issued by Sri Kesari Warmadewa in 913 AD and mentioning Walidwipa. The Hindu Majapahit Empire (1293–1520 AD) on Eastern Java island founded a Balinese colony in 1343. The empire collapsed slightly before 1500 due to assaults, causing an exodus to Bali.

Europeans first discovered Bali when Dutch explorer Cornelis de Houtman arrived in 1597, though a Portuguese ship had foundered off the coast of Bukit as early as 1585. The Dutch soon established a trade post, and the Dutch East India Company (VOC) started trading from early 17th century. Dutch control of the island was firmly established after a series of colonial wars (1846–1849). These wars were so fierce (with the entire royal court of the Raja, women and children, plunged into battle armed with kris and spears, prefering to kill each-other on the battlefield rather than be taken captive) that afterwards the Dutch governors exercised relatively little influence over the island, generally allowing local control over religion and culture to remain intact.

International tourism started in the 1920s.

After being conquered by Japan during World War II, Bali became part of the Republic of East Indonesia, and in 1948 became part of United States of Indonesia.

In 1965, after a failed coup d'etat against the national government, Bali was the scene of widespread killings of members and sympathizers of the Communist Party of Indonesia (PKI) by right-wing militias, along with several other parts of Indonesia.