As of 2023^[update], Lagos is the largest city in the continent of Africa as well as in Nigeria, a country where it was the capital. In a 2022 report by Business Africa Insider, the city is the fourth wealthiest city in Africa after Johannesburg, Cape Town and Cairo.

Lagos was founded in the 16th-century by the Awori people on the Bight of Benin. Following the British ruling in the city in 1851, it became a protectorate in 1861.

The core of modern-day Lagos, Lagos Island was originally known as 'Oko' to the native Awori, a sub-group of the Yoruba people, and later as 'Eko' when it was under the administration of the Benin Kingdom. This name came from Ikurame, meaning 'war camp' in the Edo language. The Portuguese would refer to it as "Onim" and later "Lagos". To differentiate the modern settlement from the older kingdom in the area, the name "Onim" has been applied to the latter by some historians such as Toby Green.

Lagos means "lakes" in Portuguese. Portuguese explorer Rui de Sequeira visited the area in 1472, naming the area around the city Lago de Curamo, which means Lake of Curamo. It has also been suggested that the city was named after the Portuguese seaport of Lagos in the Algarve. Alfred Moloney considered this explanation more probable than derivation from the Portuguese word lago ("lake"), and Sir Alan Burns likewise stated that the Portuguese named the settlement after the city of Lagos in southern Portugal.

Lagos was originally inhabited by the Awori subgroup of the Yoruba people. Awori legend has it that their ruler Olofin was given a mud plate by Oduduwa, with the instructions to place it in the river and settle wherever it sank to the bottom. After drifting down the river, it eventually sank in Lagos lagoon. Olofin divided the island among his ten sons. One of them, Aromire, planted pepper on the nearby island of Lagos. The palace of the Oba (king) of the Yoruba, Iga Idunganran, which was later built on this site, is therefore literally translated as "pepper farm palace".

The earliest people inhabiting the lagoon were fishermen. The Awori arrived by the 15th century, coming down the Ogun river seeking shelter from a war. The origins of Eko lay at Isheri, on the lower banks of the Ogun, where Ogunfunminire of Ife became the first king. As trade across the lagoon increased, the center of gravity shifted first to Ebute-Metta, then Iddo, and finally to Eko island. Those who crossed the lagoon to farm Lagos Island remained under the political umbrella of the Olofin, king of Iddo.

Trade drew numerous groups to the area, including the Ijebu in the 15th century, and Binis in the 16th century. The Portuguese began trading in the lagoon circa 1472 but bypassed the small island communities, going directly to Ijebu.

By the mid-16th century, the Kingdom of Benin was taking an increasing role of European trade, and expanding west to control more coastal access points and cloth production centers. Around 1600, a dispute broke out between the Beninese and other foreign merchants on one hand and the local Awori on the other. This became an opportunity for Benin to exert its influence. Oba Orhogbua attacked Iddo, but was beaten back by the Olofin and the Awori. Eventually the Benin armies were victorious (according to their traditions), or a military stalemate ended in a negotiated settlement (according to the Awori). Lagos Island became a fortified Benin military post, with the commander Asheru exerting significant influence in the region, particularly among non-Awori merchants.