The town was founded in 1652 by Ebba Brahe, the widow of the military commander Jacob De la Gardie, and was granted city privileges by Queen Christina of Sweden. The Swedish name literally means Jacob's City or Jacob's Town. The town was founded at the old harbor of the parish Pedersöre and this name lives on in the Finnish name of the municipality, Pietarsaari, literally Peter's Island. Pedersöre remains an independent municipality neighboring Jakobstad.
The city grew slowly at first, with the authorities scarcely promoting any growth. In 1680 the inhabitants were ordered to relocate to the cities of Karleby (Kokkola), Uleåborg (Oulu) and Nykarleby, but the order was rescinded. Wars also contributed to the slow growth, and the city was invaded by Russian troops twice during the Greater Wrath, and large parts of the town were burnt to the ground. A majority of the inhabitants fled the city. While those with means moved across the sea to the Swedish side, others took shelter in the forest or in the archipelago. Many were captured or killed. During the 1720s, some of the previous inhabitants returned, while newcomers also added to the population. The subsequent decades were finally marked by a period of growth, and the current church was built in 1731.
An artillery school was located in Jakobstad during the Finnish civil war. During World War II, the city was bombed once by Soviet bomber planes, causing a few casualties. Up until the 1960s, the town was overwhelmingly Swedish speaking, but as a consequence of industrial expansion in the 1960s and 1970s, the need for additional work force caused a large influx of Finnish speakers. The town remains bilingual with 56% being Swedish and 40% Finnish speakers
