1590s, "assembly of persons wearing masks and usually other disguises," from French mascarade or Spanish mascarada "masked party or dance," from Italian mascarata "a ball at which masks are worn," variant of mascherata "masquerade," from maschera (see mask (n.)).
Extended sense of "disguise in general, concealment or apparent change of identity by any means" is from 1660s; figurative sense of "false outward show" is from 1670s.