The University of Michigan was established in Detroit on August 26, 1817
 as the
Catholepistemiad, or University of Michigania, by the governor and judges of
Michigan Territory. Judge
Augustus B. Woodward specifically invited The
Rev. John Monteith and Father
Gabriel Richard, a Catholic priest, to establish the institution. Monteith became its first President and held seven of the professorships, and Richard was Vice President and held the other six professorships. Concurrently, Ann Arbor had set aside 40 acres (16 ha) in the hopes of being selected as the state capital. But when
Lansing was chosen as the state capital, the city offered the land for a university. What would become the university moved to
Ann Arbor in 1837 thanks to Governor
Stevens T. Mason. The original 40 acres (160,000 m2) was the basis of the present Central Campus.
 The first classes in Ann Arbor were held in 1841, with six freshmen and a sophomore, taught by two professors. Eleven students graduated in the first commencement in 1845.
By 1866, enrollment had increased to 1,205 students, many of whom were
Civil War veterans. Women were first admitted in 1870.
James Burrill Angell, who served as the university's president from 1871 to 1909, aggressively expanded U-M's curriculum to include professional studies in
medicine. U-M also became the first American university to use the
seminar method of study.
 Among the early students in the School of Medicine was
Jose Celso Barbosa, who in 1880 graduated as valedictorian and the first
Puerto Rican to get a university degree in the United States. He returned to Puerto Rico to practice medicine and also served in high-ranking posts in the government.
From 1900 to 1920, the university constructed many new facilities, including buildings for the dental and pharmacy programs, chemistry, natural sciences,
Hill Auditorium, large hospital and library complexes, and two residence halls. In 1920 the university reorganized the
College of Engineering and formed an advisory committee of 100 industrialists to guide academic research initiatives. The university became a favored choice for bright Jewish students from New York in the 1920s and 1930s, when the
Ivy League schools had quotas restricting the number of Jews to be admitted.
 Because of its high standards, U-M gained the nickname "Harvard of the West."
World War II, U-M's research supported military efforts, such as
U.S. Navy projects in
PT boats, and
After the war, enrollment expanded rapidly and by 1950, it reached 21,000, of which more than one third (or 7,700) were veterans supported by the
G.I. Bill. As the
Cold War and the
Space Race took hold, U-M received numerous government grants for strategic research and helped to develop peacetime uses for
nuclear energy. Much of that work, as well as research into alternative energy sources, is pursued via the Memorial Phoenix Project.
In the 1960 Presidential campaign, U.S. Senator
John F. Kennedy jokingly referred to himself as "a graduate of the Michigan of the East, Harvard University" in his speech proposing the formation of the
Peace Corps speaking to a crowd from the front steps of the
The Central Campus Diag, viewed from the Harlan Hatcher Graduate Library, looking North
Lyndon B. Johnson gave his speech outlining his
Great Society program as the lead speaker during U-M's 1964 spring commencement ceremony.
 During the 1960s, the university campus was the site of numerous protests against the Vietnam War and university administration. On March 24, 1965, a group of U-M faculty members and 3,000 students held the nation's first ever faculty-led "
teach-in" to protest against American policy in Southeast Asia.
 In response to a series of
sit-ins in 1966 by Voice, the campus political party of
Students for a Democratic Society, U-M's administration banned sit-ins. In response, 1,500 students participated in a one-hour sit-in inside the Administration Building, now known as the LSA Building. In April 1968 following the assassination of Dr. Martin Luther King, Jr. a group of several dozen black students occupied the Administration Building to demand that the University make public its 3-year-old commitment as a federal contractor to Affirmative Action and to increase its efforts with respect to recruiting more African American students, faculty and staff. At that time there were no African American coaches, for instance, in the Intercollegiate Athletics Department. The occupation was ended by agreement after 7 hours.
Former U-M student and noted architect
Alden B. Dow designed the current Fleming Administration Building, which was completed in 1968. The building's plans were drawn in the early 1960s, before student activism prompted a concern for safety. But the Fleming Building's fortress-like narrow windows, all located above the first floor, and lack of exterior detail at ground level, led to a campus rumor that it was designed to be riot-proof. Dow denied those rumors, claiming the small windows were designed to be energy efficient.
During the 1970s, severe budget constraints slowed the university's physical development; but in the 1980s, the university received increased grants for research in the social and physical sciences. The university's involvement in the anti-missile
Strategic Defense Initiative and investments in
South Africa caused controversy on campus.
 During the 1980s and 1990s, the university devoted substantial resources to renovating its massive hospital complex and improving the academic facilities on the North Campus. In its 2011 annual financial report, the university announced that it had dedicated $497 million per year in each of the prior 10 years to renovate buildings and infrastructure around the campus. The university also emphasized the development of computer and information technology throughout the campus.
In the early 2000s, U-M faced declining state funding due to state budget shortfalls. At the same time, the university attempted to maintain its high academic standing while keeping
tuition costs affordable. There were disputes between U-M's administration and labor unions, notably with the Lecturers' Employees Organization (LEO) and the Graduate Employees Organization (GEO), the union representing graduate student employees. These conflicts led to a series of one-day walkouts by the unions and their supporters.
 The university is engaged in a $2.5 billion construction campaign.
In 2003, two lawsuits involving U-M's
affirmative action admissions policy reached the
U.S. Supreme Court (
Grutter v. Bollinger and
Gratz v. Bollinger). President
George W. Bush publicly opposed the policy before the court issued a ruling.
 The court found that race may be considered as a factor in university admissions in all public universities and private universities that accept federal funding. But, it ruled that a point system was unconstitutional. In the first case, the court upheld the
Law School admissions policy, while in the second it ruled against the university's undergraduate admissions policy.
The debate continued because in November 2006, Michigan voters passed
Proposal 2, banning most affirmative action in university admissions. Under that law, race, gender, and national origin can no longer be considered in admissions.
 U-M and other organizations were granted a stay from implementation of the law soon after that referendum. This allowed time for proponents of affirmative action to decide legal and constitutional options in response to the initiative results. In April 2014, the Supreme Court ruled in
Schuette v. Coalition to Defend Affirmative Action that Proposal 2 did not violate the U.S. Constitution. The admissions office states that it will attempt to achieve a diverse student body by looking at other factors, such as whether the student attended a disadvantaged school, and the level of education of the student's parents.
On May 1, 2014, University of Michigan was named one of 55 higher education institutions under investigation by the Office of Civil Rights "for possible violations of federal law over the handling of sexual violence and harassment complaints." President
White House Task Force to Protect Students from Sexual Assault was organized for such investigations.
The University of Michigan became more selective in the early 2010s. The acceptance rate declined from 50.6% in 2010 to 26.2% in 2015.
 The rate of new freshman enrollment has been fairly stable since 2010.