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The town was named after Dr. William Cutler of Massachusetts, who visited the area north of the town around 1880 and encouraged others to settle in what became the pioneer town of Cutler.The Charles Deering Estate, located in nearby Palmetto Bay, contains the Cutler Fossil Site where mammoths, saber-toothed tigers and California condors are among the many fossil records.

The park holds archeological evidence of Native American habitation of the land 10,000 years ago. Tequesta burial mounds are also found there. The area called Cutler Ridge had been called the "Hunting Ground" by some of the earliest Caucasian settlers in the area, circa 1825.In the early 1900s the Florida East Coast Railway was extended south to Cutler, which was located near what is now the Charles Deering Estate.

Cutler then served as the place where people settling in the undeveloped Homestead, area went to get their supplies. In 1992, Hurricane Andrew made landfall near Cutler Ridge. The storm left the area in "almost total destruction". The dense vegetation near the shore and the dense subdivision development of the area are thought to have been factors which mitigated the extent of areas impacted by flood damage caused by Andrew.

However, nearly every building suffered major damage from the wind, and the damage in Florida was estimated at $25 billion, the most expensive natural disaster in US history to that point.In May 2002, the Cutler Bay Steering Committee company met to discuss the formation of a municipal advisory committee, where the committee would advise on the incorporation of the Cutler Ridge area into the city of Cutler Ridge.

The decision to incorporate was spurred in part by the efforts to recover from Hurricane Andrew. The proposed incorporation boundaries included Southwest 184th Street on the north and Southwest 216th and 224th streets on the south. In addition, the west boundary would include the Turnpike, U.S. 1 and Southwest 112th Avenue, and Biscayne Bay would serve as the east boundary.In April 2005, the Charter committee members looked at over a dozen names for the city, ranging from "Pine Ridge" and "Cutler Bay" to just "Cutler".

They reduced the choices to "Cutler Ridge" and "Old Cutler Bay". In November 2005, voters approved the charter and chose the name "Cutler Bay" for the county's 35th municipality, over "Cutler Ridge" by a vote of 1,920 to 1,403. In the months following the name change, many of those born and raised in the area that had been known as Cutler Ridge since the 1870s refused to accept the new name.