The city is at the center and the town wraps entirely around it, except for the portion that is under Cayuga Lake. There is an urbanized city center with a pedestrian street surrounded by commercial offices and retail businesses and an increasing amount of residential real estate. The town is a mixture of suburban and rural land uses with one large village, Cayuga Heights, to the east of the city.
Ithaca is divided between the hills and the flats. The latter is on the valley floor, a southward extension of Cayuga Lake that was essentially a marsh when Europeans arrived in the latest 19th century. Regular flooding and water-borne diseases delayed development. The wetlands were drained through the early 19th century and the village of Ithaca was incorporated in 1821. When the Erie Canal opened in 1823, Ithaca was connected to it via the Seneca-Cayuga Canal and Cayuga Lake. Commerce could then get in and out in large volumes at low expense and the village grew. Cornell University was founded in 1865 with money that Ezra Cornell made in the telegraph business. The first railroad that didn’t need a horse team to pull it up the valley wall arrived in Ithaca in 1871. More followed and Ithaca had another way to conduct the business of commerce and continued to grow. Local industry expanded from this period up to a peak of manufacturing employment in 1962. The National Cash Register Company, Morse Chain, and Ithaca Gun made machined metal products and employed thousands. Cornell expanded greatly in the 1960s and is now by far the largest employer in the city and town. Ithaca College moved from downtown Ithaca to South Hill during the 1960s and also grew, becoming the second largest employer. The business of Ithaca is now education.