Captain Martín Ruiz de Gamboa founded Castro in 1567. It is, together with Santiago and La Serena, the oldest town in Chile.

In 1594, San Antonio de Castro, with its 8.000 inhabitants, was doing brisk agricultural trade mainly in wheat, potatoes, barley, oats and linseed. At the height of its prosperity, Castro was sacked by Dutch pirates, visited by Spilbergen in 1615 and later by Enrique Brouwer?s expedition. In 1640, a Dutch squadron razed Castro, burning its buildings and neighbouring countryside.

An earthquake in 1837 almost reduced Castro to a complete ruin. In 1907 it had only 1,243 inhabitants, as a result of the earthquake and other problems. The laying of the railroad to Ancud, initiated by the government of Don Pedro Montt and completed in 1912, resulted in increased prosperity and a growth of population.

In 1826 the name San Antonio de Castro was lost when the legal incorporation of Chiloé into Chile only made mention of the department of Castro.