Umberto's Clam House, pictured here in the distance, at the corner of Mulberry and Hester Street, has long been famous as the site of a mob hit.

The establishment was opened by Umberto Ianniello in 1972. His son, Matthew Ianniello AKA "Matty the Horse" was a rambunctious mobster and part of the Genovese crime family. He was later be found guilty of skimming the profits from around 70 Manhattan restaurants, bars, and strip clubs. This list included his father's restaurant.

At 4:30 in the morning on April 7, 1972, gangster "Crazy Joey," Joe Gallo was killed while dining at Umberto's with friends and family. His party included Gallo's wife of three weeks, her 10-year old daughter, and his bodyguard Peter Diapoulas, and Diapoulas' date. They had just come from the Copacabana nightclub at 10 East 60th Street. Gallo, who was celebrating his 43rd birthday, supposedly thought the Genovese family wouldn't take offense at his presence as Little Italy was believed to be off-limits for gang brawls. Gallo was a member of the Profaci crime family and had been marked for execution by the Colombo gang for several months. The shooting left bullet holes in the facade of the restaurant across the street (they were still visible in the mid-1990s!) The next morning, Colombo gang member Joseph Luparelli turned himself in to the FBI as one of the perpetrators. Luparelli detailed the events of the evening as follows:

Luparelli and a friend, who happened to be at Umberto's Bar, spotted Gallo and entourage enter the restaurant and take a table facing the door. Luparelli rushed to a nearby hangout of other Colombo members to alert them to the sighting. The men included Philip Gambino and Carmine Di Biase. They phoned acting head Yacovelli and left the restaurant briefly the arm themselves. Shortly after, five men drove two cars to Umberto's, four of whom entered the back door of Umberto's and shot 20 bullets. Three of these bullets entered the mobster's body. Gallo stumbled out into the street and he died on the pavement. The Colombo men fled to Nyack, New York, at which point Luparelli began to become concerned that the others planned to kill him as well. He turned himself into the FBI after fleeing to California.

Matty Ianniello claimed that he was not involved in the incident in any way, and recounted diving from the cash register into the kitchen when the first shot was fired. On the floor of the kitchen, Ianniello covered his eyes. The next thing he heard was the empty clicks of a gun pressed against his skull. Fortunately for Ianniello, Gallo's bodyguard depleted his ammo trying to save his client.

On February 13, 1986, the court sentenced Matty Ianniello and eight others to time in prison after being indicted for racketeering charges. With "Matty the Horse" in jail, the Federal Government began overseeing the business of Umberto's. United States Attorney Rudolph W. Giuliani administered this action, which made it the only restaurant in the country to have been overseen or seized by the government due to mob activity. From 1988 until 1994, all managerial manners and finances were handled by government-appointed Michael C. Prezioso. Owner and brother of Matty, Robert Ianniello, complained that the interference left slim profits during the 6 years of supervision. A revision to the agreement restored Ianniello's management rights in 1994, though Prezioso would still be allowed to perform spot inspections of all financial records.

Umberto's has moved twice since the 1972 shooting, once in the mid-1990s to Mulberry and Broome, and again in 2010 to a spot closer to the original. Umberto's is owned by Robert Ianniello Jr., the grandson of Umberto Ianniello. The original Umberto's building is occupied by Ristorante Da Gennaro.