The earliest recorded trading privileges of Aalborg date back to 1342 when King Valdemar IV received the town as part of his huge dowry for marrying Helvig of Schleswig. The town prospered and become one of the largest communities in Denmark. Its growth sped up in 1481 when the merchant and trade association Guds Legems Laug was established.
During the Middle Ages, many important institutions were established in Aalborg, including Budolfi Cathedral and the Hospital of the Holy Ghost, a monastery and nunnery to help people in need. It was transformed into a hospital during the Reformation and still exists today as a nursing home for the elderly.
In 1530 a large part of the town was destroyed by fire, and at the end of 1534, it was stormed and plundered by the king's troops after a peasants' revolt. The Reformation in 1536 brought about the demolition of the town's two monasteries. As a result of these events, the town became a Lutheran bishopric in 1554.
During the period 1550-1640, as a result of increased foreign trade, Aalborg enjoyed great prosperity. The population grew in parallel with the development of numerous buildings in the city. In 1663, Aalborg suffered yet another serious fire, which destroyed the tower of Budolfi Church.
During the second half of the XVIII century, Aalborg entered a further period of prosperity with its population rapidly growing from 4,160 in 1769 to 5,579 in 1801.
In 1814 Denmark ceded Norway to Sweden and Aalborg lost its important role as the country's centre for Norwegian trade. In the mid-19th-century, Aalborg was overtaken by Aarhus as the biggest city in Jutland. By the end of the 19th century, there was however an upturn. The pontoon bridge over Limfjord was completed in 1865, and after four years, the railway reached the city. The harbour itself was also improving, eventually becoming Aalborg Denmark's second largest port. Aalborg became the main producer of tobacco products and spirits in Denmark. In 1901, the population had increased to almost 31,500.
Around the beginning of the XX century, as a result of decisions taken by the municipality, many of the half-timber houses in Aalborg were torn down. They were in turn replaced by hundreds of modern buildings, which completely transformed the look of the city.
By 1960, Aalborg had become famous as the "city of smoking chimneys", with half of the inhabitants working in industry or manufacturing. In 1970 the population had grown to around 97,000.
In the 1970s, Aalborg's industry entered into a period of decline, which in turn led to a drop in the city's population around 1990, when it began to increase again. By the year 2000, the service and education sectors accounted for about 60% of the workforce, partly as a result of the founding of Aalborg University in 1974.