It's possible to find in Olhão, since prehistoric times, vestiges of settlements that prove the occupation of this territory in very early times. The oldest written reference to Olhão, is dated back to 1378 and at the time it was designated as a place that was called Olham.
The proximity of the sea bar and the existence of water in abundance were decisive factors for some fishermen, in the early XVIIth century, to settle on the beach of Olhão. The village developed against the wishes of Faro authorities, to which the lands belonged. This growth was only possible due to the protection of the Saint Lawrence Fortress dated from the middle of the XVIIth century, that despite being a bit precarious, had the important role to watch over the sea bar entrance and to discourage the pirates attacks.
The increase of the coastal and offshore fishing, as well as, the commercial trade, gave origin to a large population outbreak and, in 1695, the local residents of this place requested to the Bishop the separation from the parish council of Quelfes, so it was then founded the parish council of Our Lady of the Rosary of Olhão.
During the French occupation of the Algarve, in 1808, emerged in Olhão, on the 16th of June, a spontaneous and genuine popular uprising against the abuses of the invaders. This revolt culminated with the expulsion of the French from the place of Olhão and, in one impulse, from all the Algarve. The following month, 17 men sailed from Olhão to Brazil in a small boat characteristic of the town, the so called Caique, named "Bom Sucesso", following the mission to take to the Royal Portugese Court in exile in the brazilian colony the good news of the french defeat. This crew took with them a missive, unofficial, in which was described the bold attitude that Olhão had in this revolt. The reward was translated into a Permit with the law force with wich the Regent Prince decided to distinguish Olhão and its inhabitants, this way Olhão stopped being only a place and it was raised to Vila (small town) known as Vila de Olhão of the Restoration.
The transition to a small town involved the creation of a new Council, endowed with local autonomy, which only happened in 1826. On this year, it was built the Town Hall of Olhão, being created for the purpose, the so called place of Juiz de Fora (Outside Judge) who at the time, presided over the town council.
In 1835, the Moncarapacho parish council became part of the Term of Olhão and in the following year, the Town Hall took possession of the parishes of Olhão, Quelfes, Pechão and part of the Moncarapacho parish council.
In 1874, takes place a judicial division of Portugal that determined definitely the constitution of the County/Council of Olhão, with the current five parishes: Olhão. Moncarapacho, Quelfes, Pechão and Fuseta.
As time went by, the small fishing village has become a major economic, social and urban center, in such a way that in 1985, it was raised to town. Olhão The Village of the Restoration becomes Olhão Town of the Restoration.