Once the southern tip of the Yucatán Peninsula, Ambergris Caye was an important Maya trading post. Around 1500 years ago, in order to open up a better trade route between the Yucatán coast and mainland Belize, the Maya dug the narrow channel at Bacalar Chico that now separates Ambergris from Mexico.
As with their counterparts on the mainland, the local Maya inhabitants gradually retreated to the bush as contact with the Europeans became more frequent. Whalers in the 17th century probably gave the island its current name, which derives from the waxy gray substance used in perfume production that comes from the intestines of sperm whales. According to folklore, British, French and Dutch pirates used the island's many coves as hideouts when ambushing Spanish ships, so they may also be responsible for the title. Small treasure troves have been discovered on the island, and gold coins and old bottles have been washed ashore – all evidence of pirates using the island for its fresh water, abundant resources and hidden coves. These swashbucklers turned into mainland loggers who partly depended on manatees and turtles from the northern cays for their survival.
Ambergris Caye was not significantly populated until the War of the Castes, when the war in the Yucatán first forced mestizos, and then Maya, across Bacalar Chico and onto the island. The town of San Pedro (named for Peter, the patron saint of fishermen) was founded in 1848.
Ownership of the island was bandied about between a group of wealthy British mainlanders. Finally, in 1869, James Hume Blake purchased the land for US$625 with the gold of his wife, Antonia Andrade, a rich Spanish refugee widow from the Yucatán. The Blake family converted much of the island to a coconut plantation, conscripting many of the islanders to work the land.
The coconut business thrived for less than a century. By the 1950s it had been all but destroyed by a series of hurricanes. In the 1960s, the Belize government forced a purchase of Ambergris Caye and redistributed the land to the islanders.
While the coconut industry declined, the island's lobster industry began to develop. The market for these crustaceans skyrocketed once refrigerated ships came to the island. San Pedro lobster catchers formed cooperatives and built a freezer plant on their island.
Perhaps inevitably, the waters close to Ambergris Caye were overfished. Fisherfolk looked to supplement their incomes by acting as tour, fishing and dive guides for the smattering of travelers who visited the island. Today, lobster stocks have partly recovered with the aid of size limits and an annual closed season, but tourism and real estate are the booming businesses on Ambergris.