The date of Graciosa’s discovery is uncertain although it probably took place as the result of the activity of seafarers from nearby Terceira island. The only certainty is that it received cattle by order of Prince Henry the Navigator and that it already had settlers by the middle of the 15th century.
The pioneer and land-clearer of the island was Vasco Gil Sodra, a native of Montemor-o-Velho in Portugal, accompanied by his family and servants. He built his house at Carapacho where he first landed. In spite of the efforts made by Vasco Gil Sodra to become the island’s donee and the fact that he built a custom-house on it, the captaincy of the northern part was given to Pedro Correia da Cunha (who was married to the sister of Cristopher Columbus’s wife) and the southern part to Duarte de Barreto.
The growing population (originating, according to some historians, in the Beiras and Minho regions of Portugal and also in Flanders) and prosperity of the island led to town charters being granted to Santa Cruz in 1486 and Praia in 1546. The names of the great families who contributed to the settlement and growth of the island are still to be found among its inhabitants. Devoting its energies to agriculture and viniculture from the very outset, Graciosa was already exporting wheat, barley, wine, and brandy in the 16th century. With a predominantly agricultural economy and carrying on all its trade with Terceira, which had a port frequented by large ships and which was the economic and administrative center, Graciosa suffered from attacks and pillaging by corsairs in the 16lh and 17th centuries.
Several historical figures have visited Graciosa over the centuries. The first was Father Antonio Vieira, the famous 17th century Portuguese writer. When the ship on which he was sailing from Lisbon was wrecked, he was picked up by a Dutch privateer who put him ashore on Graciosa, where he stayed for two months. He was followed by Chateaubriand, who visited the island when he was heading toward America while fleeing from the French Revolution. The French author mentions his stay there in several of his works. Almeida Garrett, who introduced Romanticism style in Portugal, lived there for some time in 1814 when at the age of 15 he visited an uncle who was a judge there. As a young man, Garrett wrote verses on the island revealing his talent as a poet from an early age. Finally, in 1879 Prince Albert of Monaco, who was outstanding for his hydrographical work and studies of marine life, called at Graciosa on his yacht Hiroudelle and visited the cavern called Furna da Caldeira.
Concentrating on agriculture, livestock raising and the dairy industry, Graciosa has preserved its characteristics as a quiet rural island while accompanying and participating in the progress of the Azores.
Resulting from general emigration to the United States during the 1950s to 1970s, Graciosa has undergone a general decrease in demographics that has affected the socio-economic stability of the island community.
In 2010, the island of Graciosa joined the international network for verification of the Comprehensive Nuclear Test-Ban Treaty through the installation of monitoring station.