Archeological evidence indicates that the area that includes what is now Prince Edward Island was inhabited as early as 8500 B.C. At the time of European discovery in the 16th century A.D., Micmac Indians, a nomadic hunting and fishing tribe, were living there. Jacques Cartier of France reached the island in 1534. In 1603, it was named Île St. Jean by Samuel de Champlain. The island was the site of fishing communities, but of little permanent settlement, until the treaties of Utrecht, signed in the period from 1713 to 1715, granted Acadia (Nova Scotia) to Great Britain. Many Acadians, wishing to remain under French rule, moved to the island.

The British seized Île St. Jean in 1745 and held it for three years. In 1758, during the French and Indian War, they occupied it permanently, and most of the Acadians were dispersed. St. John's, as the island came to be known, was annexed to Nova Scotia in 1763. In 1769, it was made a separate colony, with Charlottetown as capital. Many Scots came to the colony in the 1770's, and a large number of Tory refugees from the United States settled there after the Revolutionary War. In 1798, the name was changed to Prince Edward Island. In 1803 the Earl of Selkirk settled 800 Scottish immigrants on the island.

Although economic development was slow, agriculture, lumbering, and shipbuilding proved profitable, and the colony continued to grow. In 1864, the colonial conference that eventually led to Canadian confederation (1867) was held in Charlottetown. Prince Edward Island, however, did not join the confederation until 1873. The Canadian government then provided the money to buy out the many absentee English landlords who owned most of the island and to absorb debt incurred in constructing a trans-island railway.

When the era of lumbering and wooden ships passed, the province declined economically and the population failed to grow. While much of Canada underwent great economic growth and diversification in the 20th century, Prince Edward Island remained dependent on small-scale farming and fishing. Tourism became an important factor in the decades following World War II, but overall economic growth was slow. In the 1970's and 1980's, there was significant industrial development. Following the elections of 1993, Liberal Party candidate Catherine Callbeck became premier, the first woman elected head of a province. In 1996, Callbeck resigned her posts as premier and as party leader. She was succeeded in both positions by Keith Milligan.

In a November, 1996, general election, Progressive Conservative Party leader Patrick G. Binns was elected premier of Prince Edward Island. The Conservatives' 11-year government ended in 2007, when 33-year-old Liberal Party leader Robert Ghiz won the general election. He is the son of former Premier Joseph Ghiz.