Local landowner Elijah Combs Sr. laid out the town in 1824 as the planned seat of the newly established Perry County. Both the town and the county were named for Cdre. Oliver Hazard Perry, the hero of the 1813 Battle of Lake Erie in the War of 1812. The post office was initially known as Perry Court House but the name was officially changed to Hazard in 1854. The city was formally incorporated by the state assembly in 1884.

Long isolated by the surrounding mountains, Hazard was opened to the outside world by the arrival of the railroad in 1912. The only access to the valley had previously been 45 miles down the North Fork of the Kentucky River or a two-week trip over the surrounding mountains. The railroad brought boom times to the town, but the Great Depression saw prosperity end as quickly as it had begun.

The song "High Sheriff of Hazard" was written by Tom Paxton in reference to a coal miner's strike in 1964.

In 1981, several cast members of the television series The Dukes of Hazzard – viz., Catherine Bach, James Best, Sorrell Booke and Rick Hurst – visited Hazard during its Black Gold Festival. Soon afterwards, the series' stars Tom Wopat and John Schneider made appearances in Hazard.

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