Petoskey and the surrounding area are notable for being the setting of several of the Nick Adams stories by Ernest Hemingway, who spent his childhood summers on nearby Walloon Lake, as well as for a high concentration of Petoskey stones, the state stone of Michigan.
According to the United States Census Bureau, the city has a total area of 13.5 km² (5.2 mi²). 13.0 km² (5.0 mi²) of it is land and 0.5 km² (0.2 mi²) of it is water. The total area is 4.02% water. Petoskey is situated on the shore of Little Traverse Bay, which is part of Lake Michigan.
Petoskey is located along two state highways: M31, which goes west along Little Traverse Bay and then south towards Traverse City and beyond, and M131, which goes directly south from Petoskey towards Boyne City and north towards Mackinaw City.
As of the census of 2000, there are 6,080 people, 2,700 households, and 1,447 families residing in the city. The population density is 467.6/km² (1,210.9/mi²). There are 3,342 housing units at an average density of 257.0/km² (665.6/mi²). The racial makeup of the city is 94.18% White, 0.33% African American, 3.17% Native American, 0.81% Asian, 0.02% Pacific Islander, 0.20% from other races, and 1.30% from two or more races. 1.17% of the population are Hispanic or Latino of any race.
There are 2,700 households out of which 27.5% have children under the age of 18 living with them, 39.8% are married couples living together, 11.0% have a female householder with no husband present, and 46.4% are non-families. 39.4% of all households are made up of individuals and 14.6% have someone living alone who is 65 years of age or older. The average household size is 2.14 and the average family size is 2.89.
In the city the population is spread out with 23.0% under the age of 18, 9.6% from 18 to 24, 28.5% from 25 to 44, 21.7% from 45 to 64, and 17.3% who are 65 years of age or older. The median age is 39 years. For every 100 females there are 85.6 males. For every 100 females age 18 and over, there are 81.2 males.
The median income for a household in the city is $33,657, and the median income for a family is $48,168. Males have a median income of $35,875 versus $25,114 for females. The per capita income for the city is $20,259. 12.0% of the population and 6.6% of families are below the poverty line. Out of the total people living in poverty, 8.6% are under the age of 18 and 8.4% are 65 or older.