Before the French Revolution, Moulins was the capital of the province of Bourbonnais and the seat of the Dukes of Bourbon. Its documented existence may be traced back at least as far as the year 990. In 1232, Archambaud VIII, Sire de Bourbon, granted a franchise to the village's inhabitants.

The town achieved greater prominence in 1327, when Charles IV elevated Louis I de Clermont to Duke of Bourbon. Either Louis or the later Peter II, Duke of Bourbon and of Auvergne moved the capital of the province from Bourbon-l'Archambault to Moulins. Note: This article in French suggests Pierre II moved the capital, while the local tourism website (also in French) suggests it was Louis I.

In February 1566 it became eponymous to the Edict of Moulins, an important royal ordinance dealing with many aspects of the administration of justice and feudal and ecclesiastical privilege, including limitations on the appanages held by French princes, abrogation of the levy of rights of tallage claimed by seigneurs over their dependents, and provisions for a system of concessions on rivers.

Coco Chanel went to school in Moulins as an orphan, before embarking on her future career as a fashion designer and major innovator in women's clothing. It was the birthplace of the great 19th-century operatic baritone and art collector Jean-Baptiste Faure.