The city of Petoskey hugs the shore of Little Traverse Bay and is bisected on the north–south axis by Bear River. The central business district and neighborhoods in the western portion of the city lie on the lowlands that border the bay, while the neighborhoods to the east and south climb up hillsides.
Petoskey was named for Ignatius Pe-to-se-ga, a Chippewa and early landowner in the area in 1852. The economy depended at first on lumbering, the manufacturing of wood products, and limestone quarrying. With the arrival of the Grand Rapids and Indiana Railroad and the Chicago and West Michigan Railroad in the 1870s and 1880s, respectively, Petoskey became the center of resort traffic for northwestern Lower Michigan; trains as well as steamers delivered city dwellers. The Stafford's Perry Hotel (1899; 100 Lewis Street) with its large veranda, and the towered and shingled former Chicago and West Michigan Railroad Depot, now the Little Traverse Regional Historical Society Museum ( EM2), are notable reminders of the late-nineteenth- and early-twentieth-century resort industry. The exclusive shops in the Gaslight District and the large marina ( EM1) tell of the continued importance of resorters to Petoskey.
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