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The city of Valdez was named in 1790 by the Spanish explorer Don Salvador Fidalgo after the Spanish naval officer Antonio Valdés y Basán. It lies at the head of Port Valdez (pronounced "val-deez"), a natural stillwater fjord in the northeast area of Prince William Sound. It is located about 11 miles inland from the Sound and is surrounded by the Chugach Mountains, which are the most heavily glaciated mountains in the Northwest.

Valdez is the northernmost port in North America that is ice-free year-round. As a result, a town developed there in 1898. The northernmost point of the coastal Pacific temperate rain forest is located in Valdez, on Blueberry Hill. Some steamship companies praised the Valdez Glacier Trail as a better way to get access to the Klondike gold fields or as a better way to find new gold fields in Alaska than the route from Skagway. But many prospectors found that they had been deceived, as the glacier trail was twice as long and steep as reported. Many died attempting the crossing.

The town covers 277.1 square miles. 220 miles of it is land and 55.1 miles (or 19.88%) is water.

Valdez is a commercial and sport fishing port. A port of call in the Alaska Marine Highway ferry system, freight moves through Valdez, bound for the interior of Alaska, by way of the Richardson highway, built between 1899 and the early 1900s. It was a summer-only highway, until 1950, when it became a year round road.

Thompson Pass, north of Valdez on the highway, is home to spectacular waterfalls and glaciers. Thompson Pass is also known for hazardous driving conditions during the winter.

Deep-sea and freshwater fishing as well as sightseeing of the marine life and glaciers boost the tourism industry in Valdez. The Valdez oil terminal is where oil from the Trans-Alaska pipeline is loaded onto ships.

In 1964, the Good Friday Earthquake destroyed the city. In Valdez, 32 people lost their lives as a result of a 30 foot high tsunami. The tsunami was caused by liquefaction of the glacial silt which formed the city's foundation and it led to huge underwater landslides, causing a section of the city's shoreline to break off and sink into the sea. In 1967 the town was relocated 4 miles east to its present site. In all of Alaska 114 people died.

Between 1975-1977, the Trans-Alaska pipeline was built designed to carry oil from the Prudhoe Bay oil fields in northern Alaska to a terminal in Valdez. The oil is loaded onto tanker ships for transport. As a result of the construction and operation of the pipeline and terminal, the economy of Valdez got a huge boost.

In 1989 Exxon Valdez oil spill occurred as the oil tanker Exxon Valdez was leaving the terminal at Valdez full of oil. The spill took place at Bligh Reef, about 25 miles from Valdez. The oil did not reach Valdez, but it destroyed much of the marine life in the surrounding area. The clean-up of the oil brought a temporary boost to the economy of Valdez, but caused the bankruptcy of the Chugach Corporation, which had partially depended on the sea for its sustenance.

Before 1778, as well as now, the territory south of Valdez has belonged to the Chugach Eskimo, a maritime hunting people. To the North, the land belongs to the Ahtna, an Athabaskan speaking people of the Copper River Basin. The Chugach and the Athna used the area for fishing and trading copper, jade, hides and other furs. The Chugach had eight villages spread out through the rest of Prince William Sound. Of the eight, only Tatitlek survives today.

In 1778 Captain Cook the first non-Alaska Native sailed into the Sound naming it Sandwich Sound after his patron, the Earl of Sandwich. When Cook returned to England, the editors of his maps renamed the sound after Prince William IV, popularly known as "Silly Billy. Cook named Hinchinbrook and Montague Islands, as well as Bligh Island and a few other locations in the Sound.

In 1790, the Spanish cartographer Lt. Salvador Fidalgo was sent to Alaska to establish the Spanish claim in the area and also to investigate the extent of Russian involvement. As Fidalgo explored the Sound, he named Cordova, Port Gravina and other places. Fidalgo named the area "Bay of Valdez" after Admiral Antonio Valdez, who was head of the Spanish Marines and Minister of the Indies at the time.

During the 1800s, while the Russians owned Alaska, there was little exploring of Prince William Sound. They were mostly interested in gathering sea otter pelts. Nuchek, on Hichinbrrok Island, became the center for trade in the area, between Russians and the natives and among several native groups.

During the winter of 1897-98 gold-seekers came to Valdez to follow the "All-American Route" over the Valdez Glacier into the Interior. The advertised route was inaccurate, even though it was advertised as an established, preexisting trail. It was a great shock, therefore, to the would-be miners to arrive in Valdez and find no town and no real trail. A tent city sprang up at the head of the bay; thus Valdez was formed. The trip over the glacier was difficult and many of the four thousand stampeder's that came through that year died. The following year, during the difficult winter of 1898-99 , large numbers of people had a long and difficult time due to inadequate supplies.

In 1899 a trail was cut through Keystone Canyon and over Thompson Pass. The following year the Army approved the road as a military trail to Eagle. Known as the Goat Trail, it later became the Richardson Highway in 1919, the only route to Fairbanks until the 1920's. As Valdez became a major port of traffic going into and out of the interior, it's population soared to 7,000.

1900-1920: Valdez goes through a major “boom” as the prospectors started concentrating on gold, copper and silver deposits. Along with the main industries of mining and shipping, fishing, tourism and fox farming provided additional employment and revenues.

1920-1929: By the 1920's, Valdez's first boom had busted. In 1924 the Alaska Railroad that connected Seward to Fairbanks via Anchorage was completed. As the Valdez route was no longer the only entry way to the interior, mining slowed down, and became less profitable. In 1923 the army shut down Fort Liscum, and in 1925 pulled out completely, with the population of Valdez falling to around 400-500. Fort Liscum was renamed Dayville as it came under the ownership of the Day family. The Days prospected the land, ran a sawmill, a cannery, a school and a store on the old Fort site.