The city takes its name from the Ainu word "Fura-nui," which means "Stinky Flame" or "Foul-Smelling Place," in the language of the indigenous people of Hokkaido. This is most likely because the valley was associated with sulfuric fumaroles near Tokachi Peak. In 1897 the first homesteaders arrived from Mie Prefecture and settled in what is now the Ogiyama area of the city. The Village of Furano was established as a satellite settlement of the then-preeminent Utashinai Village. In 1899 the settlement was transferred from under the jurisdiction of Sorachi County to Kamikawa County, an official town hall was raised, and Furano Village, Sorachi County was officially established.
Mass transportation soon followed when a railway link to Asahikawa, what is now the second largest city in Hokkaido, was opened in 1900. Three years later, Furano was divided into the upper Kamifurano Village (the present-day town of Kamifurano) and the lower Shitafurano Village (present-day Furano and Minamifurano.) In 1908, Minamifurano Village (now a town) established itself as an autonomous municipality. On April 1, 1915 Yamabe Village was created as a separate municipality, and Shimofurano, Sorachi County gained Second Class Village Status in the Hokkaido Village System. Following rapid development, on April 1, 1919, Shitafurano Village achieved town status and was renamed Furano Town. It gained First Class Town Status exactly two years later. On September 30, 1956, Furano annexed the village of Higashiyama. Ten years later, Furano annexed the town of Yamabe and the population boost was enough for it to become a full-fledged city. Furano officially changed its name to Furano City on May 1, 1966.