The first record of settlement of the area that is now Virginia-Highland was in 1812, when William Zachary bought and built a farm on 202.5 acres (0.819 km2) of land there. In 1822 he sold his farm to Richard Copeland Todd (1792–1850). Todd's brother-in-law, Hardy Ivy, settled in 1832 in what is now Downtown Atlanta. The road between their two farms came to be known as Todd Road (a portion of which still exists in Virginia-Highland).

In the 1880s, Georgia Railroad executive Richard Peters and real estate developer George Washington Adair organized the Atlanta Street Railway Company. Their first project was the Nine Mile Trolley, which started serving the area sometime between 1888 and 1890 . At first, patrons used this streetcar line to visit "the countryside" outside the city, but the line also enabled later development in the area.

The iconic curves in the street at the intersections of Virginia Ave. with N. Highland and Monroe are remnants of the trolley line which required gentle curves. The Trolley Square Apartments (now "Virginia Highlands Apartments") near Virginia and Monroe were built on the site of trolley maintenance facilities.

Streetcar service to Virginia-Highland ended around 1947, along with all of the other trolley lines into and out of central Atlanta.

Virginia-Highland, like most intown Atlanta neighborhoods, suffered decline starting in the 1960s as residents moved to the suburbs. Less-affluent residents moved in, some single-family houses were turned into apartments, and crime increased. Some businesses closed and were replaced by lower-rent tenants such as pawn shops. Many buildings deteriorated.

What could have been the death knell for the neighborhood sounded in the mid-1960s, when the Georgia Department of Transportation proposed building Interstate 485 to connect what is now Freedom Parkway through the neighborhood and to what is now Georgia 400 at Interstate 85. It would have included an interchange at Virginia Avenue where John Howell Memorial Park is today. Despite the I-485 proposal moving forward, a few middle-class families began moving back into the neighborhood, renovating homes.

In Fall 1971, Joseph (Joe) Drolet and others founded the Virginia-Highland Civic Association (VHCA), whose mission was to defeat I-485. They along with residents of Stone Mountain, Inman Park, and Morningside finally defeated I-485, and became a political force to be reckoned with. The current Neighborhood Planning Unit (NPU) system is an outgrowth of these events. In 2009, the original north/south freeway (connecting 675 to 400) was again put on GDOT's to-do list, but this time running in a tunnel underneath the neighborhoods, with buildings to vent exhaust fumes and smog above ground.

Between 1972 and 1975, property values increased from 20 to 50 percent. Home ownership levels rose 20 percent. A tour of thirteen renovated homes started in 1972. The Georgia Department of Transportation began selling properties it had acquired for I-485, virtually all of them for infill housing. The 3 acres of land on Virginia Avenue where 11 houses had been taken and demolished to make way for a Virginia Avenue exit, however, was finally opened in 1988 as John Howell Memorial Park, in memory of Virginia-Highland resident and anti-freeway activist John Howell, who died from complications of HIV in 1988.

During the 1970s and 1980s the VHCA also worked to improve the city's process of home inspection, to develop a resource network of quality, affordable service providers to aid homeowners in renovation, and to encourage developers to lease renovated commercial buildings “as is” at low rates in order to encourage new and unique businesses, and thus a truly distinct commercial district.

In the early 1980s, Atkins Park restaurant was renovated. Meanwhile, Stuart Meddin bought and renovated the 1925 commercial block at North Highland and Virginia.

In 1988, the turn-of-the-century trolley barns on 5 acres on Virginia Avenue on the east side of the BeltLine (today's Virginia Highland Apartments) were torn down despite the City Council and VHCA's attempts to save them. Although previously assuring local residents that he favored saving the historic structures, Mayor Andrew Young then vetoed the resolution, and the Council's vote of 11-3 was not enough to override it. Young cited the discovery of asbestos in the buildings and other hazardous materials on the property.

As the neighborhood continued to regentrify, property values increased rapidly; the shops and restaurants became progressively more upscale. Towards the end of the 90s, the neighborhood-oriented character of the business districts gave way to businesses serving patrons from across greater Atlanta. VIrginia-Highland wrestled with traffic and parking issues. Apartments affordable to students became more difficult to find.

In November 2006, the Georgia Trust for Historic Preservation added Virginia-Highland to its list of "places in peril" due to an acceleration of teardowns and infill projects by real estate developers and newcomers to the area. However, Virginia-Highland remains one of the most architecturally historic, distinct and vibrant neighborhoods in Atlanta.

Residents, through the VHCA, succeeded in getting the city council to pass zoning legislation prescribing development that fits the scale of the streets, rolling back loose zoning ordi nances passed in the 1960s. The new zoning also prescribes a maximum number of each type of establishment - restaurants, bars, retail and other types.

The zoning aims to preserve a vibrant mix of enterprises while keeping control noise, parking and traffic issues but also addresses specific problems which came up in 2005-2008:

- Avoiding Virginia Highland suffering the same fate as Buckhead Village, where a large number of bars opened, eventually attracting crime from other areas of the city

- Fighting a liquor permit for the 700-seat Hilan Theatre

- Opposing "The Mix@841" project at 841 N. Highland Ave., originally proposed to be 80 feet tall

In December 2008 the VHCA bought the land land for New Highland Park, a small 0.41 acres park at N. Highland and St. Charles.

In Autumn 2010, a rash of seven muggings occurred, statistics which were far lower than those of the 1980s when the neighborhood was edgy, but in 2010 shaking up the neighborhood. Partly in response, the local security patrol, FBAC, expanded patrol coverage to the entire neighborhood. Shortly thereafter in Nov. 2010 Charles Boyer was murdered during a mugging, for which the "Jack Boys" were indicted in Jan. 2011. Police continued to step up patrols and since then Virginia Highland has returned to its status as one of Atlanta's lower-crime neighborhoods.

Currently the neighborhood is enjoying adjacent development projects including a new biking and walking trail along the BeltLine from Piedmont Park to Inman Park, as well as the pending redevelopment of Ponce City Market, the old Sears building, which later became City Hall East. Ponce City Market is slated to become a major multi-use development including a gourmet food hall of national importance. Behind Ponce City Market is the brand new (2011) Historic Fourth Ward Park.

Newspaper articles from the early 1920s refer to the "Virginia Highland" section of Atlanta with regard to the area around the intersection of Virginia Avenue and Highland Avenue. Later in the 1920s, southeast of this intersection the "Virginia Highlands" (with an "s") subdivision was built. However, neither term appeared again in the press until the 1970s.

During the revolt against the construction of the I-485 freeway through Morningside and what is now Virginia Highland, a pro-highway group called themselves the "Highland- Virginia Civic Association", claiming to speak for the neighborhood. When Joe Drolet and other residents formed a group to oppose the highway in Fall 1971, they chose the name "Virginia Highland Civic Association".[34] With the victory of the anti-highway forces, the Virginia-Highland name stuck and started to appear in the press in reference to the entire neighborhood between Amsterdam, Ponce, Piedmont Park and Druid Hills.

Around Atlanta, "Virginia-Highland", "Virginia Highlands" and "the Highlands" are all commonly heard. However, only "Virginia-Highland" is the official name of the neighborhood. The other terms are even included in some business names, but are incorrect.

The term VaHi, imitating the New York style of naming neighborhoods (SoHo, TriBeCa), first was used in the Atlanta newspapers in 1998. It is now in common use as a shortened, playful form or in URLs of neighborhood media and organizations (examples are www.vahi.org, www.vahinews.com and vahi.patch.com).

Virginia Highland is a neighborhood of Atlanta, which unlike in many other cities, are officially defined and organized and given specific areas of control. The Virginia Highland Civic Association consists of a volunteer board and oversees matters controlled at the neighborhood level such as community festivals, community safety, beautification, and efforts to improve parks, sidewalks, etc. As noted above, the Atkins Park neighborhood, while having its own neighborhoods association, participates in the VaHi association much as if it were part of VaHi. Planning, building permits, etc. are controlled by the Neighborhood planning unit F, which also includes Morningside-Lenox Park, Piedmont Heights and Lindridge-Martin Manor.