I am using an Asus external monitor with 1600 x 900 native resolution connected to my Macbook Air (Yosemite) using a mini display port to VGA adapter. When I try to set the display resolution in System Preferences > Displays, I click "options" and "Scaled" to see a list of additional resolutions ranging from 800 x 600 through 1920 x 1080. For some reason 1600 x 900, the native resolution of the external display is not listed. 1920 x 1080 is the closest match to the native resolution, but it looks awful. How can I set the resolution to 1600 x 900?
The most likely explanation is that your miniDP to VGA adapter is not an original/high-quality one. I've seen it happen before, and as soon as that person bought an original Apple miniDP to VGA adapter the issue is gone and native resolution is recognized without any issue.
In System Preferences > Display choose Resolution: Default for display - that should set it to whatever your monitor advertises as it's native screen size. Generally, if you can, try not to use VGA - try to use at least DVI.