Ice is defined as a food and is frequently used in direct contact with food and beverages. Packaged ice is commercially produced and can be easily found in grocery and convenience stores. However, the quality and safety of packaged ice products is not consistent. The Packaged Ice Quality Control Standards manual (PIQCS) published by the International Packaged Ice Association provides the quality and processing standards for packaged ice produced by its members. Packaged ice produced on the premise of stores (on-site packaged ice) is not required to be in compliance with these standards. In this study, packaged ice produced by manufacturing plants or by in-store bagger (ISB) machines and on-site packaged ice were compared for their microbiological quality and microbial diversity. Our results revealed that 19% of the 120 on-site packaged ice samples did not meet the PIQCS microbial limit of 500 CFU/mL (or g) and also the absence of coliforms and Escherichia coli. Staphylococci were found in 34% of the on-site packaged ice samples, most likely through contamination from the packaging workers. None of the ISB and manufactured packaged ice samples had unacceptable microbial levels, and all were devoid of staphylococci. Salmonella was absent in all samples analyzed in this study. Microbial community analysis of ice based on 16S/18S rRNA targeted sequencing revealed a much higher microbial diversity and abundance in the on-site packaged ice than in the ISB ice. Proteobacteria, especially Alphaproteobacteria and Betaproteobacteria, were the dominant bacterial groups in all samples tested. Most of these bacteria were oligotrophic; however, a few opportunistic or potential pathogens were found at low levels in the on-site packaged ice but not in the ISB packaged ice. The types of microbes identified may provide information needed to investigate potential sources of contamination. Our data also suggest a need for enforcement of processing standards during the on-site packaging of ice.