In the old tagalog language the name Bay derives from the same phonetic roots as "baybay" (shore) and as "babae" (woman) and "babaylan" (priestess). The name can thus be thought of either as a reference to the shore of the lake, or to a great lady. In the case of the latter, it has been suggested that the great lady might be the same as Maria Makiling, as her mountain was within the scope of Bay's original territory.
A more recent legend of Bay's origin says that the name Bay was derived from Datu Pangil's three daughters. After they were baptized, they were named Maria Basilisa, Maria Angela, and Maria Elena. The first letters of Basilisa, Angela, Elena were taken together and read Bae. Over a period of time, Bae became Bay.
The powerful Gat Pangil was Datu of this already thriving community in 1571 when 18 year-old Spanish Capitan Juan de Salcedo landed with Augustinian missionaries Alfonso de Alvarado and Diego Espinar came to claim the territories for spain. It was salcedo who took the name of the town and named the lake after it - Laguna de Bay, the Lake of the Town of Bay. Eventually, the Spanish came to call the whole province “La Provincia de la Laguna de Bay.”
In 1581, Bay became the capital of the Province of Laguna de Bay and remained so until 1863 when the capital was moved to Pagsanjan.
Bay is politically subdivided into 16 barangays.