Forest Hill was incorporated as a village in 1923. It was named after the summer residence of John Wickson, which was built in 1860 at the junction of Eglinton Avenue and Old Forest Hill Road. The hill is still there but the forest is long since gone, having been replaced by apartment buildings.

Prior to its incorporation, Forest Hill had been known as "Spadina Heights". Spadina is a derivative of the First Nations word "Ishapadenah", which means a hill or sudden rise in land. The boundaries of the present day neighbourhood are shaped from the old Spadina Heights school district.

"Lower Forest Hill", south of Eglinton, was completely developed by the 1930's. "Upper Forest Hill" was slower to develop due to the fact it had previously been occupied by the old Belt Line railway, and then by industry.

In 1967, Forest Hill Village joined Swansea Village as one of the last two independent villages to be annexed by the City of Toronto.