As a place where people have lived continuously for thousands of years Bodrum has an incredibly rich past. Its position in or near so many of the great civilization and events of ancient history also makes Halicarnassus (Bodrum's ancient name) an important site for historians. Finding one source of complete historical information on Bodrum is apparently impossible, so the account that follows is a distillation from several sources.

The first settlement in this area which left structural evidence behind was on the rocky little island where the Castle of St. Peter now stands (the castle was once completely surrounded by water). When the Knights of St. John arrived to build their fortress, they found the ruins of an older castle, now known to have been built by the Dorians around 1100 BC.

Herodotus, the "Father of History", who lived in the Fifth Century BC and was born in Halicarnassus, wrote that the Dorians came from Troezen on the east coast of the Peloponnese. They called their new island Zephyria and the settlement Zephyrium.

Historians have little evidence concerning the foundation of mainland Halicarnassus. The first known mention of it comes form the Seventh Century BC. Halicarnassus was one of six members in the Dorian Confederation of Hexapolis, along with the mainland city of Cnidos, the island of Cos, and three cities on Rhodes.

Establishing these cities was no easy task, as the Dorians were not the first people to inhabit the area. They had to fend off the continuous attacks of fierce natives known as Carians. Homer mentioned the Carians in his Iliad, calling them "barbarous of speech," (as coincidence linguists note that the dialect of the region Bodrum is now part of has the harshest dialect in the West of Turkey). Early historians credit the Carians with having taught the Greeks the use of crests on helmets and handles on shields, which were previously slung over the shoulder.

One small alliance between the Dorians and the Carians came about when a Greek opened a tavern around the spring at Salmacis (now submerged in the western end of Bodrum harbor, in present day Bardakci). Both Dorians and Carians became regular patrons, and the Carians eventually adopted a more orderly way of life from the colonists. Trade relations were established, and for a while the two races coexisted in peace.

The waters of the Salmacis fountain were said to have relaxing properties. Rumor hat it that the water, though excellent to drink, had the effect of making men soft and effeminate, sometimes even impotent. These claims resulted in the legend of Hermaphrodite. The teenaged son of Aphrodite, the Goddess of Beauty, was said to have spent a day swimming in a lake formed by the fountain. Salmacis, the nymph of the lake, fell in love with him and begged the gods to allow them to live together in a single body. They granted her wish, creating the half-man half-woman figure of Hermaphrodite.

Herodotus wrote that Halicarnassus became increasingly aligned with a group of inland inhabitants, the Ionians. This upset the other members of Hexapolis, and the misconduct of a Halicarnassian is considered a pretext for the city's expulsion from the league. All six cities competed in games celebrated annually at Tropium in honor of Apollo. A. Halicarnassian named Agasides won a bronze trophy one year and refused to follow the custom of dedicating it on the spot to Apollo. He instead hung it on the wall of his house, inciting the wrath of the other Dorian cities and giving them an excuse to cut off ties with Halicarnassus.

By the Fifth Century BC Halicarnassus appeared purely Ionian in character. Both Herodotus and his uncle Panyasis the epic poet, wrote in Ionian, and no inscriptions from this period show any trace of the Doric dialect.

In 546 BC the Persians overran the Greek cities of the coast, and Halicarnassus fell with the rest. A series of dynasties then ruled in the Persians' interest, the most famous of these, that of Artemisia I, began in 480 BC.