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By 1876, the Grand Rapids and Indiana Railroad had built a line north to Petoskey. Petoskey became the county seat of Emmet County in 1902.

Petoskey is a city and coastal resort community in the U.S. state of Michigan. The population was estimated at approximately close to 5,670 at the 2010 census. It is the county seat of Emmet County.

The Little Traverse Bay area was long inhabited by indigenous peoples, including the Odawa people. The name "Petoskey" is said to mean "where the light shines through the clouds" in the language of the Odawa. After the 1836 Treaty of Washington, Odawa Chief Ignatius Petosega (1787–1885) took the opportunity to purchase lands near the Bear River. Petosega's father was Antoine Carre, a French Canadian fur trader and his mother was Odawa.

By the 1850s, several religious groups had established missions near the Little Traverse Bay. A Mormon offshoot had been based at Beaver Island, the Jesuit missionaries had been based at L'arbor Croche and Michilimackinac, with a Catholic presence in Harbor Springs, then known as "Little Traverse". Andrew Porter, a Presbyterian missionary, arrived at the village of Bear River (as it was then called) in 1852.

Amos Fox and Hirem Obed Rose were pioneer entrepreneurs who had made money both during the California Gold Rush and at Northport selling lumber and goods to passing ships. Originally based at Northport, Rose and Fox (or Fox and Rose) expanded their business interests to Charlevoix and Petoskey in the 1850s. Rose made additional money by being a part of a business partnership that extended the railroad from Walton Junction to Traverse City. H.O. Rose, along with Archibald Buttars, established a general merchandise business in Petoskey. After the partnership split, Mr. Rose relocated to Petoskey and in 1873 started Petoskey's first dock. When the Grand Rapids and Indiana Railroad was about to be extended into the Bay View area, Mr Rose purchased much land in that area as well as trolley cars to enable transport from Petoskey to Bay View. Rose contributed to many firsts of Petoskey, including the first dock, the first general store, extensive lime quarries (Michigan Limestone Company, or Petoskey Lime Company ), erection of the Arlington Hotel, lumbering enterprises, first president of the village, harbor improvements in 1893, and officiating at early commemorative public events. Rose's influence on the city are also commemorated by the naming of the H. O. Rose room at the Perry Hotel.

In the late 19th century, Petoskey was also the location where 50,000 passenger pigeon birds were killed daily in massive hunts, leading to their complete extinction in the early 20th century. A state historical marker commemorates the events, including the last great nesting at Crooked Lake in 1878. One hunter was reputed to have personally killed "a million birds" and earned $60,000, the equivalent of $1 million today.

Petoskey is also famous for a high concentration of Petoskey stones, the state stone of Michigan. Notable natives are information theorist Claude Shannon, Civil War historian Bruce Catton and actress Megan Boone, star of the NBC television series The Blacklist (2013). The city is the boyhood home of singer-songwriter Sufjan Stevens.

This city was the northern terminus of the Chicago and West Michigan Railway.

The Petoskey stone is named after Odawa Chief Ignatius Petosega (1787–1885). With members descended from the numerous bands in northern Michigan, the Little Traverse Bay Band is a federally recognized tribe that has its headquarters at nearby Harbor Springs, Michigan. It also owns and operates a gaming casino in Petoskey.

Part of Northern Michigan, Petoskey is on the southeast shore of the Little Traverse Bay of Lake Michigan at the mouth of the Bear River. According to the United States Census Bureau, the city has a total area of 5.29 square miles (13.70 km2), of which 5.09 square miles (13.18 km2) is land and 0.20 square miles (0.52 km2) is water.

As of the census of 2010, there were 5,670 people, 2,538 households, and 1,319 families residing in the city. The population density was 1,113.9 inhabitants per square mile (430.1/km2). There were 3,359 housing units at an average density of 659.9 per square mile (254.8/km2). The racial makeup of the city was 91.7% White, 0.7% African American, 4.7% Native American, 0.4% Asian, 0.5% from other races, and 2.1% from two or more races. Hispanic or Latino of any race were 1.9% of the population.

There were 2,538 households of which 24.3% had children under the age of 18 living with them, 36.7% were married couples living together, 11.8% had a female householder with no husband present, 3.5% had a male householder with no wife present, and 48.0% were non-families. 39.2% of all households were made up of individuals, and 12.2% had someone living alone who was 65 years of age or older. The average household size was 2.10 and the average family size was 2.81.

The median age in the city was 39.8 years. 19.4% of residents were under the age of 18; 11.9% were between the ages of 18 and 24; 24.5% were from 25 to 44; 28.1% were from 45 to 64; and 16.1% were 65 years of age or older. The gender makeup of the city was 47.3% male and 52.7% female.

As of the census of 2000, there were 6,080 people, 2,700 households, and 1,447 families residing in the city. The population density was 1,210.9 per square mile (467.6/km²). There were 3,342 housing units at an average density of 665.6 per square mile (257.0/km²). The racial makeup of the city was 94.18% White, 0.33% African American, 3.17% Native American, 0.81% Asian, 0.02% Pacific Islander, 0.20% from other races, and 1.30% from two or more races. Hispanic or Latino of any race were 1.17% of the population.

There were 2,700 households out of which 27.5% had children under the age of 18 living with them, 39.8% were married couples living together, 11.0% had a female householder with no husband present, and 46.4% were non-families. 39.4% of all households were made up of individuals and 14.6% had someone living alone who was 65 years of age or older. The average household size was 2.14 and the average family size was 2.89.

In the city, the population was spread out with 23.0% under the age of 18, 9.6% from 18 to 24, 28.5% from 25 to 44, 21.7% from 45 to 64, and 17.3% who were 65 years of age or older. The median age was 39 years. For every 100 females, there were 85.6 males. For every 100 females age 18 and over, there were 81.2 males.

The median income for a household in the city was $33,657, and the median income for a family was $48,168. Males had a median income of $35,875 versus $25,114 for females. The per capita income for the city was $20,259. About 6.6% of families and 12.0% of the population were below the poverty line, including 8.6% of those under age 18 and 8.4% of those age 65 or over.

Among the many colleges in Michigan includes North Central Michigan College, located in Petoskey. The public school system consists of a high school, a middle school, and four elementary schools. Additionally, Petoskey Public Schools has a Montessori education building.

This climatic region has large seasonal temperature differences, with warm to hot (and often humid) summers and cold (sometimes severely cold) winters. According to the Köppen Climate Classification system, Petoskey has a humid continental climate, abbreviated "Dfb" on climate maps.

Petoskey and the surrounding area are notable in 20th-century U.S. literature as the setting of several of the Nick Adams stories by Ernest Hemingway, who spent his childhood summers on nearby Walloon Lake. They are the setting for certain events in Jeffrey Eugenides' 2002 novel Middlesex, which also features Detroit and its suburban areas.

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