Grand Terrace's roots go back to Mexican land grants dating from the period between 1830 and 1840. According to the Riverside Press, in 1876 there were nine buildings in the Terrace-Colton area.

The development of Grand Terrace, or East Riverside as the Grand Terrace - Highgrove area was then called, became a reality with the construction of the Gage Canal in 1896. This 22-1/2 mile canal, built at a cost of 2 million dollars, brought water from the Santa Ana River marshlands below The Terrace. With plenty of irrigation water, Grand Terrace rapidly became an agricultural community featuring fine, quality citrus. However, the severe "freeze" of 1913 destroyed many groves. Walnuts, a hardier tree, were planted as replacements along with peaches as a quick-profit crop.

The social activities in the early 1900's centered around the Farm Bureau Extension Service and the Women's Club established in 1908, followed by the P.T.A. in the 1930's. Since there were no local churches, people traveled to surrounding communities for worship and other church activities.

Grand Terrace was originally called "The Terrace" because of its higher ground. Later, the name "Grand" was added referring to the area's lovely view. The area’s first settlers were Dr. Benjamin Barton (hence Barton Road) and Dr. W.R. Fox. By the time the Riverside-Highland Water Company was formed in 1898, this community was known as Grand Terrace.

In 1962, the Grand Terrace Chamber of Commerce was organized. From the very beginning the Chamber was interested in preserving the local identity of the area, and therefore, was a strong supporter of cityhood.

The push by residents for cityhood led to hearings by the county's Local Agency Formation Commission (LAFCO), which was charged with deciding whether the town could succeed as a city.

According to Tony Petta, the City’s first mayor, several hundred Grand Terrace residents attended the LAFCO hearings and the news they heard wasn't always encouraging. LAFCO members seemed to think the area was too small to support itself as a city.

Then Supervisor Dennis Hansberger during his first term in office said the concerns were that Grand Terrace had no tax base -- meaning little sales tax revenue and an insufficient amount of property taxes -- to pay for city services.

But Hansberger supported the city and helped obtain the $28,000 needed for a feasibility study.

The residents got the issue on the ballot, and on Nov. 7, 1978, 82 percent of Grand Terrace's voters said yes to incorporation. The city was officially formed Nov. 30 of that year, when the City Council had its first meeting at Terrace Hills Middle School and became the 16th City in San Bernardino County.

Eighteen residents applied to be city council members and five were elected: Tony Petta, Thomas A. Tillinghast, Hugh J. Grant, Doug Erway and Jack A. Allen. Petta was chosen mayor.