The islands were first populated by the Chono people, who were pushed toward the Archipelago de Aisén as the Mapuche invaded from the north. The Spaniards took full possession of Chiloé in 1567, some five years after a smallpox epidemic killed much of the indigenous population. A measles epidemic in 1580 further weakened the native influence.

During the wars of independence, Chiloé was a Spanish stronghold; the Spanish resisted criollo attacks in 1820 and 1824 from heavily fortified Ancud, until their final defeat in 1826. In 1843 the schooner Ancud left the shores of Chiloé full of islanders, who stuck out four months of sailing to lay Chilean claim to Magallanes at Fuerte Bulnes. The later wool and ranching booms in Magallanes were built on the backs of migrant Chilote labor. Their cultural influence is still felt in the far southern regions.

Chiloé itself stayed off the radar until the 1850s when its proximity to the new Puerto Montt gave the islands increasing commercial importance. It took another century to establish a road running the length of the main island. Fishing was and is the main industry, but is now heavily dominated by salmon and shellfish farming. Tourism has increased significantly during the last two decades.