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On 2 June 1651 King Frederik III gave 20 Danish-Dutch peasants the rights to settle at Allégade, where they founded a town named "Ny Amager" (New Dutchman-town). Farming in the area was not particularly fruitful, and the peasants were unable to pay taxes.  In 1697 a large part of the town burned down, and the land was returned to the crown by Christian V, son of Frederik III.

In 1700-1703, King Frederik IV built a palace on the top of the hill known as Valby Bakke. He named the palace Frederichs Berg, and the rebuilt town at the foot of the hill consequently changed its name to Frederiksberg. Numerous local houses were bought by wealthy citizens of Copenhagen who did not farm the land, but rather used the properties as country houses. Then the town started to slowly transform from a farming community to a merchant town, with craftsmen and merchants. During the summer rooms were offered for rent, and restaurants served food to the people of Copenhagen who had left the cramped city in favour of the contryside - near the royals.

Initially the town developed slowly with its population growing from 1,000 in 1770, to 1,200 in 1800, and to 3,000 in 1850. In 1852, the Danish Parliament removed restrictions which prohibited permanent construction outside Copenhagen's city walls. In 1950 numerous residential areas were rapidly constructed. This contributed to the city's subsequent fast population growth - in 1900 the population was 80,000, and in 1950 Frederiksberg reached a population of 120,000.