The city was home to a large Spanish-speaking population in the first census, in 1850, but after the U.S. won the war, non-Hispanic settlers came to Southern California in increasing numbers. The decade of the 1880s is known as the "Southern California Land Boom" because so many people moved to the state. In October 1883, a group of Los Angeles investors purchased Rancho Rincon del Diablo. This group sold the land to the newly formed Escondido Company in 1884. On December 18, 1885, investors incorporated the Escondido Land and Town Company, and in 1886 this company purchased the 12,814-acre (52 km2) area for approximately $100,000. Two years later, in 1888, Escondido was incorporated as a city; the vote was 64 in favor of cityhood with 12 votes against. Railroads such as the Santa Fe and Southern Pacific were laid in the 1880s. The opening of U.S. Route 395 in 1930 boosted economic growth in Escondido.

Escondido was primarily an agricultural community, growing muscat grapes initially. After a dam was built in 1894-5 to form what is known today as Lake Wohlford, orange and lemon trees were planted in large numbers, as were olive and walnut trees. By the 1960s, avocados became the largest local crop. Since the 1970s, Escondido has lost most of its agricultural land to housing developments.