In the Malay language "Medan" means a large place to gather. Since long ago Medan has been a meeting place for people who come from Hamparan Perak, Stabat, Suka Piring and other places. They came for trading, gambling and so forth.

When it was founded in 1590, Medan was just a small village called Medan Putri, which was built by Guru Patimpus, a descendant of Raja Singa Mahraja, who governed Negeri Bakerah in the Highlands of Karo. Around the 17th century Aceh and Deli Land competed to acquire this land. Due to its strategic location, which is on the meeting point of the rivers Deli and Babura - both formed a busy trading traffic route - Medan Putri quickly flourished into transit port for traders who come from all over the world.

John Anderson, a British government employee based in Penang, who visited Medan in 1823, wrote in his book, Mission to The East Coast of Sumatera, Edinburgh edition, 1826, that Medan was still a small village with population of around 200.

The development of Medan took a swift pace with the opening of tobacco plantation. According to Tengku Lukman Sinar, SH in his book "Sejarah Medan Tempo Doeloe" (2001) an Arabian to Surabaya, Said Abdullah Bilsagih who became an in-law of Sultan Mahmud Perkasa Alam Deli, took several Dutch traders from Java to plant tobacco in Deli. They were J. Nienhuys, Van Der Falk and Elliot, who came to Deli in 7 July 1863. The Sultan of Deli gave them 4000-bahu of land near labuhan (Cape Sepassai) as 20 years of right to operate on (erfpacht).

In March 1864 the harvested tobacco was shipped to Rotterdam, Holland. Deli tobacco was well received for its good quality for cigar wrapper. This success encouraged J. Nienhuys in 1869, to open new lands for tobacco plantation in Martubung, Sunggal, Sungai Beras and Klumpang. The labors for these tobacco plantations were generally Chinese who were sent for from Swalow (Tiongkok), Singapore, Malaya and Tamil (Keling) who were sent for from India via Penang.

When the rulers in China made it more difficult for Chinese workers to come to Deli and the British administrator in India began to require stricter conditions for Keling workers, the Dutch tobacco industrialists started to think of taking contract labors from Java. The first wave of workers from Java consisted of 150 contract labors from Bagelen.

The population of Chinese in Labuhan in 1867 had reached 1000. On the other hand, inland comers such as the Javanese or Minangkabau people were only 474. While the Malay and Karo people were thought of as being defiant to the Dutch, so they couldn't be employed as plantation workers.

As the tobacco business expanded and grew, J Nienhuys, Jansen and P.W. Clemen relocated their company's office of De Deli Maatschappij, from Labuhan to the village of "Medan Putri." Ever since then, the village of "Medan Putri" grew busier and became more known as the City of Medan.