Mundelein has been inhabited since at least 1650, when the Potowatami Indians were known to have been trading with French fur traders. The first European inhabitants reached the area in the early 1800s. Peter Shaddle (for whom a street is named) was the first known settler, building a log cabin in the area now owned by St. Mary of the Lake Seminary in 1835.

The next settlers were tradesmen escaping from England's industrial depression, who became farmers in the Mundelein area. In honor of their former professions, they named the city "Mechanics Grove", and built schools, churches, and businesses.

The community grew and (while still unincorporated) changed its name to 'Holcomb' in honor of John Holcomb, a person who was active in the area's development. As Holcomb, the community added a railway station and a post office.

The Holcomb area incorporated in February 1909 under a new name, 'Rockefeller'. This was a reference and homage to John D. Rockefeller. An unconfirmed rumor states that Mr. Rockefeller visited and toured the town named in his honor.

The name Rockefeller was short lived, however. In July 1909, Rockefeller became 'Area'. This name change was requested by a local educational entrepreneur named Arthur Sheldon, who bought 600 acres near town and built a school on it. The school taught sales techniques, including the philosophy of "AREA", which stood for "Ability, Reliability, Endurance, and Action." At one time boasted 10,000 students, many of them women (which was unusual for 1909). However, after several years the school closed.

In 1921, Archbishop George Mundelein (later Cardinal) of Chicago purchased the property formerly owned by Sheldon's school. On it, for about $10 million (1921 dollars), he had constructed St. Mary's of the Lake Seminary. This seminary is still in operation, hosting up to 400 students.

In 1924, 'Area' became the Village of Mundelein in honor of Cardinal Mundelein's sponsorship of the seminary.

In thanks, the Cardinal donated the Village its first new fire truck upon completion of the Village Hall in 1929. The current Village Hall, with a few additions, is the same structure today that was built in 1929.

The 1926 International Eucharistic Conference held at the seminary hosted an estimated 500,000 people (the village population at the time was 500 people).