Prior to its development as a small craft harbor, the land occupied by Marina del Rey was a salt-marsh fed by fresh water from Ballona Creek, frequented by duck hunters and few others. Burton W. Chace, a member of the Los Angeles County Board of Supervisors, referred to the area as mud flats, though today the area would more properly be referred to as wetlands.
In the mid-19th century, Moye C. Wicks and Louis Mesmer thought of turning this Playa del Rey estuary into a commercial port. He formed the Ballona Development Company in 1888 to develop the area, but three years later the company went bankrupt.
Port Ballona made by Louis Mesmer and Moye Wicks was then sold to Moses Sherman. Sherman purchased 1,000 acres (400 ha) of land around the Ballona lagoon and Port Ballona in 1902 under the name the Beach Land Company. Sherman and Clark renamed the land "Del Rey". Port Ballona was then renamed Playa Del Rey. The port was serviced by the California Central Railway opened in September 1887, this line later became the Santa Fe Railway, that later became the Atchison, Topeka, and Santa Fe Railroad. The rail line ran from the port to Redondo junction. A street car tram line was made to the Port by the Redondo and Hermosa Beach Railroad company, that had incorporated on February 21, 1901. This company was part of the Los Angeles Pacific Railroad owned by Sherman. The tram line opened December 1902 departed downtown at 4th & Broadway.
In 1916, the U.S. Army Corps of Engineers revisited the idea of a commercial harbor, but declared it economically impractical. In 1936 the U.S. Congress ordered a re-evaluation of that determination, and the Army Corps of Engineers returned with a more favorable determination; however, the Marina del Rey harbor concept lost out to San Pedro as a commercial harbor and development funding went to the Port of Los Angeles instead.
In 1953, the Los Angeles County Board of Supervisors authorized a $2 million loan to fund construction of the marina. Since the loan only covered about half the cost, the U.S. Congress passed and President Dwight D. Eisenhowersigned Public Law 780 making construction possible. Ground breaking began shortly after.
With construction almost complete, the marina was put in danger in 1962–1963 due to a winter storm. The storm caused millions of dollars in damage to both the marina and the few small boats anchored there. A plan was put into effect to build a breakwater at the mouth of the marina, and the L.A. County Board of Supervisors appropriated $2.1 million to build it. On April 10, 1965 Marina del Rey was formally dedicated. The total cost of the marina was $36.25 million for land, construction, and initial operation.
Los Angeles County then solicited bids for the marina's development, selling 60 year leaseholds to willing developers.Real estate developer Abraham M. Lurie was the single largest leaseholder responsible for the building of three hotels, two apartment complexes, 1,000 boat slips, and several shopping centers, offices, restaurants; his holdings also included the last undeveloped piece of waterfront land in Marina del Rey. He eventually ran into cash flow problems and sold a 49.9% interest to Saudi Arabian Sheik Abdul Aziz al Ibrahim, a brother of Waleed bin Ibrahim Al Ibrahim and a brother-in-law of King Fahd; the investment soon turned sour and following a protracted and aggressive lawsuit, in 1993 Lurie lost his entire interest in the development to Abdul Aziz.