The Spanish arrived in 1774, scouted the area as a possible mission site and named it The Lake of Our Lady of Mercy which later became the corrupted Spanish/English "Merced." Francisco De Haro, first Alcalde of Yerba Buena, once owned Lake Merced, but in 1868, the Spring Valley Water Company bought the water rights for the Lake. Lake Merced was to act as the city's main reservoir.

During this time, Spring Valley sold off portions of its land on Lake Merced to make golf courses that still exist today. For almost 90 years, Lake Merced Golf Club has endured, evolved and prospered, mainly because of their members who enjoy playing golf on a world-class course.

From the 1850s to the early 1900s, Lake Merced was the hot spot for gamblers, duelists, sporting men and other entertainment purposes.

One of the most shocking duels that happened at Lake Merced was a duel between the Chief Justice of the California Supreme Court David S. Terry and United States Senator David C. Broderick. David S. Terry claimed victory in this treacherous battle.