The history of San Carlos is rooted in the era of Spanish colonization of California. The territory of the modern city was originally part of the vast Rancho de las Pulgas land grant, bestowed by the Spanish crown to José Darío Argüello in the late 18th century. Before the arrival of Europeans, these lands were inhabited by the indigenous Ohlone people. The settlement took its name from the Spanish packet ship San Carlos—the first vessel to enter San Francisco Bay in 1775. The official incorporation of the city occurred much later, in 1925, when local residents voted to establish an independent municipality.
The transformation of former pastures into a developed city was driven by several strategic advantages, the most important of which was the construction of the Southern Pacific railroad. The appearance of the station allowed for quick travel to San Francisco, turning the area into an attractive suburb. The geographic factor also played a huge role: San Carlos is located south of the famous "Fog Belt" characteristic of San Francisco and Daly City, which provided the city with a mild and sunny climate that attracts new residents.
In the early period, the region's economy relied on agriculture, but in the early 20th century, active subdivision of land for residential development began. Even during its formative stages, the city's main cultural identity took shape, codified in its official motto—"The City of Good Living." Early planners focused on creating a cozy, safe community with high-quality schools and spacious homes, which defined the character of San Carlos for decades to come.