Before the establishment of the municipality of Tiwi by the Spaniards, the present poblacion and the barangays of Baybay, Libjo, Cararayan, and Naga were part of the Pacific Ocean, and the hill shared by barangays Bolo and Putsan was an islet. A volcanic eruption of the now dormant Mount Malinao filled up this part of the sea joining the hill of Bolo and Putsan with the mainland of Luzon.
In 1658, Spanish Franciscan friars planted the cross near the shore north of Malinao. The friars called the place Tigbi, after an abundant local plant. The name later evolved into Tivi, and finally evolved to its present name Tiwi.
This place began as a barrio of Malinao before it was formally organized as a politically independent pueblo in 1696. As a Catholic parish, it was administered by a secular priest under the then Diocese of Nueva Caceres, now an archdiocese. In its primeval stages, it had some 1,105 houses, a parish church, a community-funded primary school, and a cemetery outside the town proper. The villagers ordinarily engaged in fishing, planting rice, corn, sugarcane, indigo, fruit-bearing trees, and vegetables. Aside from agriculture, they also busied themselves weaving cotton and abaca clothes, and in pottery.
In Kagnipa, known today as Barangay Baybay, the dilapidated Sinimbahan, the remnant of the first concrete house of worship built by the Franciscans led by the pastor of Malinao, Fray Pedro de Brosas, remains to be the deaf witness of both the villagers' ready acceptance of the Christian faith and their suffering of persecution at the hands of the Moslems; Christian missionaries called them Moros. The parola by the shore of Sitio Nipa of the same barangay testifies to the people's paralyzing fear of the Moros' capricious forays. The market site of the pueblo before these raids was located in the present location of Baybay Elementary School. In order to sidetrack surprise attacks, at least temporarily, the market site was transferred to southernmost part of now Brgy. Baybay; henceforth, it was called Binanwaan. The transfer, however, was useless. Finally, to have enough time to escape and keep themselves safer from their enemies' easy attacks, they moved the market site and their settlement to the present poblacion now named as Barangay Tigbi. Before the Moro's assaults, Brgy. Baybay was then the center of trade and commerce because of its easy accessibility to marine transportation of goods from the islands of what are now known as Catanduanes, San Miguel, Rapu-Rapu, and Batan, not to mention those from adjoining pueblos in the mainland of Ibalon, now the province of Albay, and the Camarines.
Tiwi is politically subdivided into 25 barangays.