Aegaleo received its name from the nearby mountain which, in turn, is derived from Greek words meaning "population of goats" (Αίγα + Λαός). Originally, the area was populated by a few workers of a local factory. After 1922, a large number of refugees from Asia Minor arrived. By 1934, the area became a community and by 1941 a municipality. Its original name was New Kydoniai after Kydonies (Ayvalik) in Asia Minor.
Today, one quarter of the municipality is industrialized mainly in the east where the Cephissus valley is located and is connected as the Athens Industrial Area. Its city newspaper since 1985 has the same name with the suburban city called Aegaleo.
The area has a subway station named Aegaleo.
Some of the biggest problems for the past few decades were smog and traffic congestion.