In 1989, the people of the community of Rancho Santa Margarita established a Community Civic Association (CCA) for the purpose of providing a political voice of the community. The CCA, later known as the Rancho Margarita Civic Association (and still later as the Civic Council), briefly explored self-governance, but it was in 1995 that the RSM Cityhood Committee, a separate community organization, began the official cityhood process.

Rancho Santa Margarita was planned to be an "Urban Village," offering the best of two worlds: all of the elements and advantages of a small city plus the quality of life of a small village. In 1996 the Celebrating the Vision Committee developed Rancho Santa Margarita's Vision Statement: "A Small City with the Soul of a Small Village."

The City of Rancho Santa Margarita is located along the foothills of the Santa Ana Mountains. The City incorporated on January 1, 2000, and became the 33rd city in the County of Orange. The City has a population of 49,249.

The City is a general law city and operates under the council-manager form of government. Rancho Santa Margarita is a contract city. Police services are provided through contract with the Orange County Sheriff. Fire Protection services are provided through the Orange County Fire Authority.