Before European expansion in North America, the island was inhabited by native tribes. Western settlement is considered to have been started by Padre Jose Nicolas Balli, who set up a cattle ranch early in the 19th century. He and his family were driven out by the Mexican–American War, and were unable to return because of the American Civil War.
Most of the island was closed by the National Park Service until 1962, after which settlement was allowed and incomers began to establish an economy on the island and neighboring Port Isabel. By 1978 the island had a population of around 314 and a decade later it had a population of 1,012 and 111 businesses. Being mainly coastline, the island's main source of income is tourism, with tens of thousands of college students flocking to the island every Spring Break. In winter the island hosts "winter Texans": people (often retirees) from colder states who overwinter in the warm Texas climate. Isla Blanca Park, a preserve and recreational park, is located at the southern end of the island.