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Named for the U.S. Army's 42nd Rainbow Division that fought gallantly in World War I, Rainbow Beach & Park began as two separate municipal beaches. The first was established in 1908 by the Special Parks Commission, a city agency that studied open space needs and created parks, playgrounds, and beaches in densely- populated areas of Chicago. This small site at 79th Street and Lake Michigan was known as Rocky Ledge Beach. The name referred to the area's rocky terrain, and to the manmade limestone ledge that served as a shore promenade and provided protection from shoreline erosion. By 1912, the heavily-used beach had bathrooms and changing rooms. Illuminated by electric lights, the beach remained open until 9:30 p.m. for the benefit of working men and women.

In 1914, the City began efforts to expand the beach, and soon acquired land between 75th Street and Rocky Ledge Beach. The City Council officially named the new site Rainbow Beach in 1918. The smaller, adjacent Rocky Ledge Beach continued operating as a children's beach.

The two beaches were consolidated in 1959, when the ¿ì²¥ÊÓƵ began leasing the site from the City. In 1998, the City transferred a portion of the park to the ¿ì²¥ÊÓƵ. For many years the park lacked sufficient indoor recreational facilities, so in 1999 a large fieldhouse was constructed on the portion of the site that was transferred in 1998. Designed by David Woodhouse Architects, the fieldhouse takes full advantage of Rainbow Beach & Park's breathtaking views of the lakefront and skyline.