Liberty Village occupies land that was, for over a century, one of Toronto's most consequential institutional and industrial sites. The Central Prison (1873–1915) and the Mercer Reformatory for Women (1879–1969) stood here, followed by a dense concentration of manufacturing and warehousing facilities that operated through much of the 20th century. The name 'Liberty Village' — applied to the redeveloped precinct in the 1990s — is widely understood as a wry reference to this penal history, though it also evokes the neighbourhood's position at the western edge of the old city.

The neighbourhood's conversion from industrial to residential and office use, beginning in the late 1990s, was one of Toronto's earlier large-scale adaptive reuse projects, and the retained brick factory buildings give Liberty Village a physical character distinct from purpose-built condo districts. It has attracted a high concentration of tech, media, and creative companies, and its pedestrian laneways and courtyards give it a walkable grain unusual for a district built largely on 20th-century industrial parcels.