The village is named after a water body named Lake Zurich which is completely located inside the village.
In 2015, personal finance website, NerdWallet.com, rated Lake Zurich number one in Illinois for young families. In 2006, Lake Zurich was named by Frommer's as one of the top hundred "Best Places to Raise Your Family" and by U.S. News as one of the "Top Twenty-five Affordable Places to Live in the Country". In 2013, Lake Zurich rocketed to national fame when Sandra Bullock's character in Gravity name-dropped the village as her character's hometown.
The area of Lake Zurich was first settled by European descendants in the 1830s. Two early pioneers were George Ela, after whom the Ela township is named, and Seth Paine, who established a number of commercial ventures in the town. New England farmers moved to the area in the 1830s and 1840s, and German immigrants began to move to the area from the middle of the century. The lake now known as Lake Zurich was once named Cedar Lake in the 19th century. The village of Lake Zurich was incorporated on September 29, 1896. It remained primarily a farming community; although the village was connected to the railroad in 1910, the line was closed ten years later. However, the arrival of the highway system with Rand Road (U.S. Route 12) in 1922 and Half Day Road (Illinois Route 22) in 1927 established Lake Zurich as a convenient summer resort. The now-defunct Palatine, Lake Zurich and Wauconda Railroad also served the community. Housing development began in the 1950s, with the population expanding throughout the latter part of the 20th century.
In 1988, a historic, landmark legal case in Illinois took place settling a dispute on Lake Zurich, thereby clarifying throughout Illinois property owners' rights on private lakes. In 1988, the Illinois Supreme Court ruled in Beacham v. Lake Zurich Property Owners Association (123 Ill. 2d 227; 526 N.E.2d 154; 1988 Ill. LEXIS 91; 122 Ill. Dec 14, filed June 20, 1988) that each individual owner of the private (aka non-public) lake's bottom has the legal right to recreate over the surface waters of the entire private lake. The High Court ruled that by ownership of a lake bottom land, each partial-lake-bottom owner of a private lake can not be prohibited from recreating on the surface waters that may be located above other owners' lake bottom properties. Riparian land rights were defined in Illinois.