Mardi Gras was brought to Louisiana by early French settlers. The first record of the holiday being marked in Louisiana is 1699. The starting date of festivities in New Orleans is unknown, but an account from 1743 notes that the custom of Carnival balls was already established by that date. Processions and masking in the streets on Mardi Gras Day took place, were sometimes prohibited by law, and were quickly renewed whenever such restrictions were lifted or enforcement waned. In 1833 Bernard Xavier de Marigny de Mandeville a rich plantation owner raised money to fund an official Mardi Gras celebration.

On Mardi Gras of 1857 the Mistick Krewe of Comus held its first parade. Comus is the oldest continuously active Mardi Gras organization and started a number of continuing traditions (for example, the use of floats in parades) and is considered the first Carnival krewe in the modern sense. In 1875 Mardi Gras was declared a legal holiday by the state of Louisiana.

War, economic, political, and weather conditions sometimes led to cancellation of some or all major parades, especially during the American Civil War, World War I and World War II, but celebration of Carnival has always been observed in the city.

Year 1972 was the last year in which large parades went though the narrow streets of the city's old French Quarter neighborhood; larger floats and crowds and safety concerns led the city government to prohibit big parades in the Quarter.

In 1979 the New Orleans police department went on strike. All the official parades were canceled or moved to surrounding communities such as Jefferson Parish. Significantly fewer tourists than usual came to the city. Masking, costuming, and celebrations continued anyway, with National Guard troops maintaining order. Guardsmen prevented crimes against persons or property but made no attempt to enforce laws regulating morality or drug use; for these reasons, some in the French Quarter bohemian community are fond of calling 1979 the city's best Mardi Gras ever.

In 1991 the New Orleans city council passed an ordinance that required social organizations, including Mardi Gras Krewes, to certify publicly that they did not discriminate on the basis of race, religion, gender or sexual orientation, in order to obtain parade permits and other public licenses. In effect, the ordinance required these, and other, private social groups to abandon their traditional code of secrecy and identify their members for the city's Human Relations Commission. In protest, the 19th century krewes Comus and Momus stopped parading. Proteus did parade in the 1992 Carnival season but subsequently also suspended its parade for a time. In 2000, Proteus returned to the parade schedule.

Two federal courts later declared that the ordinance was an unconstitutional infringement on First Amendment rights of free association, and an unwarranted intrusion on the privacy of the groups subject to the ordinance. The decision of the Fifth Circuit Court of Appeals appears at volume 42, page 1483 of the Federal Reporter (3rd Series), or 42 F.3d 1483 (5th Cir. 1995). The Supreme Court refused to hear the city's appeal from this decision.

Today, many krewes operate under a business structure; membership is basically open to anyone who pays dues to have a place on a parade float. In contrast, the old-line krewes use the structure of the parades and balls to extend the traditions of the debutante season in their social circles.

The effect of Hurricane Katrina on New Orleans in late 2005 caused many to question the future of the city's Mardi Gras celebrations. The city government, essentially bankrupt after the storm, pushed for a massively scaled back celebration to limit strains on city services. However, many krewes insisted that they wanted to and would be ready to parade, so negotiations between krewe leaders and city officials resulted in a compromise schedule scaled back but less severely than originally suggested. The 2006 New Orleans Carnival schedule included the Krewe du Vieux on its traditional route through Marigny and the French Quarter on February 11th, the Saturday 2 weekends before Mardi Gras, then several parades the Saturday the 18th and Sunday the 19th a week before Mardi Gras, followed by 6 days of parades Thursday night through Mardi Gras Day. Other than Krewe du Vieux and two Westbank parades going through Algiers, all New Orleans parades were restricted to the Saint Charles Avenue Uptown to Canal Street route, a section of the city which escaped significant flooding (some krewes unsuccessfully pushed to parade on their traditional Mid City route, despite the severe flood damage suffered by that neighborhood). Restrictions were placed on time parades can be on the street and how late at night they can end. Louisiana State troopers and National Guards assisted with crowd control for the first time since 1979. Many floats had been partially submerged in the floodwaters for weeks; while some krewes repaired and removed all traces of these effects, others incorporated flood lines and other damage into the designs of the floats. Most of the locals who worked on the floats and rode on them were significantly impacted by the storm's aftermath, and many had lost most or all of the possessions in their homes, but enthusiasm for Carnival was even more intense than usual as an affirmation of life. The themes of many costumes and floats had more barbed satire than usual, with commentary on the trials and tribulations of living in the devastated city, with references to MREs, Katrina refrigerators and FEMA trailers, along with much mocking of FEMA, local, and national politicians.