The municipality was founded on November 11, 1977, when Barangays Gatub and Bagong Kahayag of the Municipality of Kumalarang and Barangays Lakewood, Bolalawan, Sebugay, Bisuangan, Lokoan, Backing, Dagum, Sapang Pinolis, Tubod, Gasa, Tiwales and Matalang of the Municipality of Lapuyan were separated and formed into an independent municipality named after Lake Wood, a large lake on which the poblacion is located. The most popular species of fish in the province can only be caught in the lake: the carpa and porang.
The Subanen tribe is the major ethnic group living in the suburban areas; they cultivate vegetables and corn for their own use. Subanens have their own dialect, but they also speak Cebuano as a common dialect for conversation.
The old name of Lakewood is Danaw Likowai and Tubod is Obod. Now Barangay Tubod is the largest barangay and most populated barangay, serving as a gateway to the town. Its name derives from the Cebuano term tubod which means "spring". It has a hospital, the Singidas Medical Clinic, which is regarded as the cleanest hospital of the town. The Lily's Hidden Spring in the upper part of Tubod, and Mainit Waterfall in the lower part of Gatub are among Lakewood's tourist attractions.