Ibicuy is a Guaraní word, meaning 'sandy area'. The Guaraní were the first inhabitants of the islands, and created raised platforms of sand and earth as look-outs and flood defences known as cerritos, which can still be seen rising above the dense vegetation which characterises the river delta. It is thought that the Guaraní arrived in Ibicuy in search of the tierra sin mal, the earthly paradise inhabited by the spirit Ñandey, located in the east close to the sea.
The islands were colonised in the late 19th century and early 20th century by European settlers, originally Italians from Montevideo searching for wood for charcoal production. The majority of settlers were from northern and central Europe and were employed in agriculture and forestry, still the predominant industries. In an effort to demarcate, protect and irrigate their lands, settlers dug new channels and filled others in, changing the geography of the islands.
The remoteness of the islands - originally accessible only by boat - made them a hideout for fugitives and criminals from Buenos Aires and Montevideo. The marxist Liborio Justo lived there in the 40's,the harsh environment and the outlaws who inhabited it,inspired his book of short stories, entitled "Rio Abajo" (Down the River)which was later made into a film with the same title.. Now tourists are increasingly visiting the islands, where typical Delta wildlife such as the Neotropic Cormorant, Capybara and Marsh Deer can be seen.