Founded as late as 1853 during the German colonization of southern Chile, Puerto Montt soon outgrew older neighboring cities due to its strategic position at the southern end of the Chilean Central Valley being a gateway city into Chiloé Archipelago, Llanquihue and Nahuel Huapi lakes and Western Patagonia.
Puerto Montt has gained renown and grown significantly due to the rise of Chile as the second largest salmon producer of the world during the 1990s and 2000s. However, the Chilean salmon aquaculture crisis of the late 2000s resulted at least temporarily in severe unemployment and exposed weaknesses in the local economy. The city's cultural heritage mixes elements of Chiloé culture with German heritage although the city has attracted a significant number of newcomers from all over Chile in the last 30 years due to employment opportunities.
Originally, the site was covered by thick forest and was called Melipulli (which means "four hills" in Mapudungun). It was selected as an entrance to Lake Llanquihue when its proximity to the open sea was discovered. The expedition was entrusted to Bernardo Philippi, a German naturalist and cartographer, but after his death in 1851, Vicente Perez Rosales took over his duties, and by the end of September started to chop trees at Reloncaví sound using local woodsman coming from Huar, Maillen, Huelmo and Calbuco Mainly. By December, after the forest was cut down, the area was burned to clear the land in anticipation of completing the settlement plan. The city itself was founded on February 12, 1853, after government-sponsored immigration from Germany that began in 1848 populated the region and integrated it politically to the rest of the country. It was named after Manuel Montt, President of Chile between 1851 and 1861, who set in motion the German immigration.
In 1912, the city was connected by train with Santiago, making it an important point of entry to the Chilean Patagonia as well as increasing quickly the commercial and transport development. By 1950 It had a population of 27500 with an important increase of demographics and urbanization. but an earthquake that took place in May 1960 destroyed Puerto Montt, by collapsing the port, the train station and destroying many building and houses. With time it recovered thus giving a new city, becoming more modern, more populated, a more important urban centre in the zone as well as a port of national interest.
At the start of March 1969, approximately 90 landless persons received advice from Socialist member of parliament Luis Espinoza due to the local authority never granting them any land they needed to build homes. On March 4, 1969, they settled on farmland belonging to an absentee landlord. Having been denied titles by the local authorities, these families simply moved onto the empty, unoccupied land. They did so seeking squatters' rights, and without making any payment of rent. Some four or five days later, the local Police Chief Rolando Rodríguez Marbán reassured the squatters that they would not be disturbed and could proceed with their home construction. However, a change of plans by the ministry of the interior quickly led to new orders.
At midnight on March 9, Luis Espinoza was charged with breaking the law, arrested, and moved to the city of Valdivia. Following direct orders from Interior Minister Edmundo Pérez Zujovic, 250 armed policemen launched an assault on the squatting families that dawn. Eight of the landless persons were shot dead and two, a 9-month child and an adult, died afterwards. All of the newly built homes were burned to the ground. The massacre is poignantly memorialized by singer-songwriter Víctor Jara in his song Preguntas por Puerto Montt.
The massacre of Puerto Montt and the public outcry that followed were major factors contributing to the defeat of Eduardo Frei's party in the Chilean presidential election of 1970 which was succeeded by Salvador Allende's Unidad Popular.
By 1979 Puerto Montt was nominated and later becoming it, the Capital of Los Lagos Region as being the principal administrative, political and commercial centre in Southern Chile.
According to the 2002 census of the National Statistics Institute, Puerto Montt spans an area of 1,673 km2 (646 sq mi); according to the 2012 census it has 218,858 inhabitants (107,748 men and 111,110 women). Of these, 192,473 (87.9%) lived in urban areas and 26,385 (12.1%) in rural areas. The population grew by 24.4% (42,920 persons) between the 2002 and 2012 censuses.
Puerto Montt has a wet oceanic climate (Köppen: Cfb) with heavy rainfall throughout the year but a drying trend in the summer. Although temperatures are consistently below 25 °C (77 °F), frosts are very rare and occur only a couple of times per month in the winter. For the 41st parallel south, closer to the equator than to the south pole, Puerto Montt is much cooler than areas further inland in terms of summer temperatures, due to cool ocean currents nearby. This is compounded by the lack of a sizeable landmass on those parallels in the southern hemisphere (see also Wellington, New Zealand, which is also at a similar latitude). That means that Puerto Montt has much cooler summers than areas at similar distances from the equator in the northern hemisphere, with the only exception being the Northern California coastline, also being affected by cool Pacific currents.
Puerto Montt is the capital of the Los Lagos Region and the Llanquihue Province, and the main sea port at the lower end of Chile's western continental land. The city is the principal commercial, services, and financial hub of the Chilean Northern Patagonia—Zona Austral. As the geographic region's main port, Puerto Montt is often considered the 'capital' of Chilean Patagonia.
Puerto Montt is also the gateway to the Chiloé Archipelago and Chiloé Island across the Chacao Channel, and the many other smaller islands in Chile's inland Sea of Chiloé.
The city's economy is now based upon agriculture, cattle, and forestry on the surrounding islands, and fishing and salmon aquaculture in the fjords and nearby Pacific Ocean.
The city is configured as the hub of one of the largest salmon aquaculture industries in the world. Hatcheries, fisheries and packing plants are mostly located south of Puerto Montt. Fresh salmon is flown daily to world markets and frozen salmon is shipped by ocean to all destinations. The tremendous growth of the region, mainly due to the salmon industry, but also due to rapid expansion of forestry, cattle, and tourism, has proven the massive economic potential of Puerto Montt and its surrounding area.
Puerto Montt has the El Tepual Airport, where two airlines operate regular flights to and from Santiago, Punta Arenas, Balmaceda, Concepción, Temuco and Bariloche (Argentina). The airlines operating at the airport are LAN Airlines (the country's largest) and Sky Airline. The flight time to Santiago is approximately two hours.
As a commune, Puerto Montt is a third-level administrative division of Chile administered by a municipal council, headed by an alcalde who is directly elected every four years. The 2012-2016 alcalde is Gervoy Paredes Rojas
Within the electoral divisions of Chile, Puerto Montt is represented in the Chamber of Deputies by Marisol Turres (UDI) and Patricio Vallespín (PDC) as part of the 57th electoral district, (together with Cochamó and Maullín, Calbuco). The commune is represented in the Senate by Camilo Escalona Medina (PS) and Carlos Kuschel Silva (RN) as part of the 17th senatorial constituency (Los Lagos Region).