The park sits on the site of a former berry farm established by Walter Knott and his family. Beginning in 1923, the Knott family sold berries, berry preserves, and pies from a roadside stand along State Route 39. In June 1934, the Knotts began selling fried chicken dinners in a tea room on the property, later named "Mrs. Knott's Chicken Dinner Restaurant." The dinners soon became a major tourist draw, and the Knotts built several shops and other attractions to entertain visitors waiting for a seat in the restaurant. In 1940, Walter Knott began constructing a replica Ghost Town on the property, the beginning of the present-day theme park. Ghost Town was Walter Knott's tribute to the pioneers, which included his own grandparents who came to California in a covered wagon from Texas in 1868 (when his mother was about four years old). The idea of an amusement park picked up in the 1950s when Walter Knott opened a "summer-long county fair."

Paul von Klieben was Walter Knott's key employee in the creation of the Ghost Town at Knott's Berry Farm and the restoration of the ghost town of Calico, California. In 1941, he joined Knott's as a staff artist, then served as art director there from 1943 to 1953. He traveled to ghost towns in the West, conducted research, and designed most of the Ghost Town section of Knott's Berry Farm. He created concept art for most of the buildings that were built there. He also drew up floor plans, oversaw the construction of buildings, and even spent some time painting concrete to look like natural rock. His Old West paintings and murals adorned the walls of many structures in the park, and a number of them still do. His art was also used extensively in Knott's newspapers, menus, brochures, catalogs and other publications.

In 1956, Walter Knott arranged with Marion Speer to bring his Western Trails Museum collection to Knott's Berry Farm. Speer had been an enthusiastic supporter of Walter Knott's efforts to create Ghost Town, and had written articles for Knott's newspaper, the Ghost Town News. In 1956, twenty years after creating his museum, Marion Speer (at age 72) donated the carefully cataloged collection of 30,000 items to Knott's in return for Knott's housing it, displaying it and naming Speer as curator. Speer continued in that position until he retired in 1969 at the age of 84.

The museum was once housed in a building (which has since been razed) at Knott's Berry Farm between Jeffries Barn (now known as the Wilderness Dance Hall) and the schoolhouse. The Western Trails Museum at Knott's is now just south of the saloon in Ghost Town.

The park became a popular destination for conservative college students in the 1960s, especially as conservative organizations like the California Free Enterprise Association, the Libres Foundation, and the Americanism Educational League were based there. According to Assistant Professor Caroline Rolland-Diamond of the Paris West University Nanterre La Défense:

In the late 1960s, a 10-foot-high (3.0 m) brick wall with barbed wire embedded into the top was constructed around "Ghost Town" and for the first time, in 1968, an admission price was required to get into that section of the park (ostensibly to keep out the "hippies" and local long-haired youth from freely "hanging out" in the park that were, on occasion, causing problems and degrading the Knott's "family" image). The entrance price originally being set at $1 for adults and 25¢ for children. Previous to this, entry was free and the cost was based on purchasing a ticket for each ride, using the A-E ticketing system similar to that of Disneyland. The Calico Log Ride (the original name of the Timber Mountain Log Ride) opened in 1969. Also during this period, an attempt to create a monorail system between Knott's and Disneyland was reportedly in the works for many years, however, project construction never began due to costs and legal issues obtaining needed property and gaining necessary right-of-way access.

When Cordelia Knott died on April 12, 1974, Walter turned his attention toward political causes. The Roaring Twenties rethemed Gypsy Camp in the 1970s with the addition of a nostalgic traditional amusement area, Wheeler Dealer Bumper Cars, and Knott's Bear-y Tales. Then with the northward expansion of a 1920s-era Knott's Airfield-themed area featuring the Cloud 9 Dance Hall, Sky Cabin/Sky Jump and Motorcycle Chase steeplechase roller coaster above the electric guided rail Gasoline Alley car ride.

The Sky Tower with the illuminated "K" in logo script at the top was built to support two attractions, the Sky Jump, operated from 1976 to 1999, and the Sky Cabin. The Sky Jump boarded one or two standing riders anticipating the thrill of the drop into baskets beneath a faux parachute canopy. From the top, twelve arms supported the vertical cable tracks of wire rope which lifted the baskets. The Sky Cabin ringed the support pole with a single floor of seats that are enclosed behind windows. Its ring revolves slowly as it rises to the top and back offering a pleasantly changing vista. It is very sensitive to weather and passenger motion, such as walking, which is prohibited during the trip. During winds 25+ mph or rain it is closed. When built, the tower was the tallest structure in Orange County (a distinction briefly held by WindSeeker before its relocation to Worlds of Fun in 2012.)

Motorcycle Chase, a modernized steeplechase rollercoaster built in 1976 by Arrow Development, featured single motorbike-themed vehicles racing side-by-side, each on one of four parallel tracks, launched together. One or two riders straddled each "Indian motorcycle" attraction vehicle. The tubular steel monorail track closely followed dips and bumps in "the road" and tilted to lean riders about the curves. Gasoline Alley, an electric steel-guide rail car ride below, was built together and intimately intertwined, which enhanced ride-to-ride interaction thrill value. Rider safety concerns of the high center of gravity coupled with the method of rider restraints caused it to be rethemed Wacky Soap Box Racers with vehicles themed to look like soap box racers, each seating two riders, strapped in low (nearly straddling the track), surrounded by the close-fitting car sides, and the dips and bumps of the track were straightened flat in 1980. Motorcycle Chase/Wacky Soap Box Racers was removed in 1996 for a dueling loop coaster Windjammer Surf Racers and now Xcelerator, a vertical launch coaster, takes its place.

On December 3, 1981, Walter Knott died, survived by his children who would continue to operate Knott's as a family business for another fourteen years.

In the 1980s, Knott's built the Calico Barn Dance featured Bobbi & Clyde as the house band. It was during the height of the "Urban Cowboy" era. The "Calico Barn Dance" was featured in Knott's TV commercials.

During the 1980s, Knott's met the competition in Southern California theme parks by theming a new land and building two massive attractions: Kingdom of the Dinosaurs, a primeval retheme of Knott's Bear-y Tales), in 1987 and Bigfoot Rapids in 1988, a whitewater river rafting ride as the centerpiece of the new themed area Wild Water Wilderness.

The Boomerang roller coaster replaced Corkscrew in 1990 with a lift shuttle train passing to and from through a cobra roll and a vertical loop for six inversions each trip.

The Mystery Lodge (1994), inspired by General Motors "Spirit Lodge" pavilion, was a live show augmented with Pepper's ghost and other special effects, which was among the most popular exhibits at Expo 86 in Vancouver, British Columbia, Canada, which was produced by Bob Rogers of BRC Imagination Arts and created with the assistance of the Kwagulth Native reserve in the village of Alert Bay, British Columbia. Mystery Lodge recreates a quiet summer night in Alert Bay, then guests "move inside" the longhouse and listen to the storyteller weave a tale of the importance of family from the smoke of the bonfire.

The Jaguar! was opened on June 17, 1995, to add another roller coaster to the mix of Fiesta Village alongside Montezooma's Revenge.

In the 1990s, after Walter and Cordelia died, their children decided to sell off their businesses.

In 1995, the Knott family sold the food specialty business to ConAgra Inc, which later resold the brand to The J.M. Smucker Company in 2008. In 2024, Smuckers discontinued sale of the Knott's Berry Farm jams in grocery stores.

On December 29, 1997, the Knott family sold the amusement park operations to Cedar Fair. Initially, the Knotts were given an opportunity to sell the park to The Walt Disney Company. The park would have been amalgamated into the Disneyland Resort and converted into Disney's America, which had previously failed to be built near Washington, D.C. The Knotts refused to sell the park to Disney out of fear that most of what Walter Knott had built would be eliminated.

In the late 1990s, Cedar Fair also acquired the Buena Park Hotel, located at the northwest corner of Grand and Crescent avenues. It was then brought up to Radisson standards and branded Radisson Resort Hotel as a franchise. In 2004, the park renamed the Radisson Resort Hotel the Knott's Berry Farm Resort Hotel.

Since being acquired by Cedar Fair, the park has seen an aggressive shift towards thrill rides, with the construction of several large roller coasters and the addition of a record-breaking Shoot-the-Chutes ride named Perilous Plunge. Perilous Plunge had the record of being the tallest and steepest water ride in the world until September 2012 when it was closed and removed. Also, in 2013, Knott's Berry Farm announced that one of the most popular rides at the park, the Timber Mountain Log Ride, would be closed for a significant five-month refurbishment, led by Garner Holt Productions, Inc.

On May 25, 2013, Knott's Berry Farm added three new family rides on the site of the former Perilous Plunge, including a wild mouse called Coast Rider, a scrambler flat ride called Pacific Scrambler, and Surfside Gliders. All three were constructed in the Boardwalk section of the park. An old bridge that connected the exit of Coast Rider and the Boardwalk became the entrance to Surfside Gliders and Pacific Scrambler. Following the 2013 season, Knott's Berry Farm removed Windseeker and moved it to Worlds of Fun, where it reopened in 2014. For the 2014 season, the historical Calico Mine Ride underwent a major refurbishment completed in six months.

During the fall of 2019, Knott's Berry Farm announced the return of Knott's Bear-y Tales as an interactive 4D dark ride as part of the park's 100th anniversary in 2020 with the name Knott's Bear-y Tales: Return to the Fair. However, the park was indefinitely shut down due to the COVID-19 pandemic at the end of its operating day on March 13, 2020. Knott's Bear-y Tales and other planned changes to the park were postponed to 2021. In June 2020, Knott's Marketplace reopened with health guidelines in place. The following month, the park introduced Taste of Calico, an outdoor food festival on weekends located in the Ghost Town section of the park. The event evolved over the season, becoming Taste of Knott's when it expanded into Fiesta Village and the Boardwalk, Taste of Fall-o-ween during the fall season, and Taste of Merry Farm for the Christmas holiday season which was canceled in December 2020 due to the regional stay at home order issued by California Governor Gavin Newsom. Amusement Today recognized the Taste Of events in its annual Golden Ticket Awards, awarding the park under the category "Industry Leader: Amusement/Theme Park" for its innovative approach.

Knott's Berry Farm returned to normal operation on May 6, 2021, including the debut of the delayed Knott's Bear-y Tales attraction originally planned for 2020. On July 1, 2024, Cedar Fair merged with Six Flags, and the combined Six Flags Entertainment Corporation took over Knott's Berry Farm, making them part of the same company as longtime rival Six Flags Magic Mountain. Cedar Fair still has controlling shares of the company.