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According to local legend, Wauconda was named after an Indigenous chief buried on the southern shore of Bangs Lake, and his name is said to translate as 'spirit water.'

Elihu Hubbard built the first log cabin on the bank of Bangs Lake in 1836, and first settler Justus Bangs built a house beside the lake in 1848; the lake has carried his name ever since.

Bangs Lake, a 306-acre natural glacial lake, is the heart of Wauconda, drawing boaters, anglers, swimmers and ice fishermen year-round.

Wauconda's first school was built in 1839, its post office arrived in 1849, the town was formally organized the same year, and the village was incorporated in 1872.

By the early 1900s Wauconda had become a popular resort village for Chicago residents escaping the summer heat, with bathing beaches ringing Bangs Lake; most of the beaches closed in the 1980s as homes and townhouses replaced them.

Bangs Lake got a brush with Hollywood fame when its beaches appeared in the 1980 comedy classic The Blues Brothers.

Wauconda is home to the Wauconda Bog Nature Preserve, a rare glacial bog ecosystem protected as a National Natural Landmark.

The 2020 census counted 14,084 people and 5,266 households in Wauconda, up from a village of barely 500 people at the end of the 1930s.

Students in Wauconda are served by Wauconda Community Unit School District 118, which also covers Island Lake, Lakemoor, Volo and parts of unincorporated McHenry County.

Wauconda's Main Street runs through a historic downtown whose oldest buildings date to the mid-1800s, mixing modern shops with 19th-century storefronts just steps from the lake.