Hammond was founded on a ford of the Zumbro River. It was originally called Lymes Ford from the settler who owned the woodland north of there. In 1856 Joseph Hammond settles in the valley, and built a house about five blocks from the vicinity of the bridge. He moved his family in, and a small stock of goods. This store continued in business until the railroad came. In 1878 the C.M&St. Paul Railroad was completed, and opened for traffic it's Wabasha office. Hammond was named for Joseph Hammond, the original owner of the town site.
In September 2010, the city was evacuated due to flooding of the nearby Zumbro River. About two thirds of the homes in the city were severely damaged.