Bali has been inhabited since early prehistoric times, firstly by descendants of a prehistoric race who migrated through mainland Asia to the Indonesian archipelago. They first settled in Bali around 3000 BC. Sembiran, a village in northern Bali, was believed to have been home to the people of the Ice Age, proven by the discovery of stone axes and adzes. Further discoveries of more sophisticated stone tools, agricultural techniques and basic pottery at Cekik in Bali's far west, point to the people of the Neolithic era. At Cekik, there is evidence of a settlement together with burial sites of around a hundred people thought to be from the Neolithic through to the Bronze Age.

In 1284, Bali was conquered by Kertanegara, the ruler of the Singasari; until the turn of the century, saw Bali under its own rule under the hands of King Bedaulu of Pejeng, east of Ubud.

The Hindu Majapahit Empire (1293–1520 AD) on eastern Java founded a Balinese colony in 1343. This resulted in massive changes in Balinese society, including the introduction of the caste system. Balinese who did not embrace the changes fled to the isolated and remote mountainous areas and hill areas. Their descendants are known today as Bali Aga or Bali Mula that means the "original Balinese". When the empire fell in 1515, there was an exodus of intellectuals, artists, priests and musicians from Java to Bali, flooding the island with Javanese culture and Hindu practices. Considering the huge influence and power of Islam at the time, it is worth pondering why and how Bali still remained strongly Hindu and Buddhist.

The First European contact with Bali is thought to have been when Dutch explorer Cornelis de Houtman arrived in 1597, though a Portuguese ship had foundered off the Bukit Peninsula as early as 1585. Dutch rule over Bali came later, was more aggressively fought for, and they were never ultimately able to establish themselves as they had in other parts of Indonesia such as Java and Maluku.

In the 1840s, a presence in Bali was established, first in the island's north, by playing various distrustful Balinese realms against each other. The Dutch mounted large naval and ground assaults first against the Sanur region and then Denpasar. The Balinese were hopelessly overwhelmed in number and armament, but rather than face the humiliation of surrender, they mounted a final defensive but suicidal assault, or puputan. Despite Dutch demands for surrender, an estimated 4,000 Balinese marched to their death against the invaders. Afterwards the Dutch governors were able to exercise little influence over the island, and local control over religion and culture generally remained intact.

On 20 November 1946, the Battle of Marga was fought in Tabanan in central Bali. Colonel I Gusti Ngurah Rai, 29 years old, finally rallied his forces in east Bali at Marga Rana, where they made a suicide attack on the heavily armed Dutch. The Balinese battalion was entirely wiped out, breaking the last thread of Balinese military resistance. In 1946 the Dutch constituted Bali as one of the 13 administrative districts of the newly-proclaimed Republic of East Indonesia, a rival state to the Republic of Indonesia which was proclaimed and headed by Sukarno and Hatta. Bali was included in the ‘’Republic of the United States of Indonesia’’ when The Netherlands recognised Indonesian independence on Dec. 29, 1949. In 1950 Bali officially renounced the Dutch union and legally became a province within the Republic of Indonesia.