Fuseta, dating from 1572, was known as “Fozeta”, a diminutive of foz, “estuary, firth”, due to the small river named “river of the trunk” that flows into the sea there. The area, originally only a collection of small huts kept to store tools for fishing boats, had gradually developed and increased in population until by an early unknown date it became a small settlement.

Fuseta already appeared in the days of the Portuguese Discoveries, when the town’s fishermen shipped aboard the Caravelas. With Gaspar Corte-Real, noble resident of this area, they discovered Newfoundland in 1500. Perhaps because of this these were the first Portuguese to venture onto the seas in search of codfish.

The oldest church of Fuseta, the Chapel of Our Lady of Carmo, existed by 1758. As the population grew, the Bishop of the Algarve, D. Francisco Gomes de Avelar, was asked to confer independence on the parish, which had previously been included in Moncarapacho. Independence was granted on 12 March 1874.

The principal economic activity of Fuseta remains fishing and its derivatives, and there was a very brave and famous fisherman named Joaquim de Jesus Dias "The Canilha" that saved many fishermans. Recently the tourism industry has been growing, due to the beautiful beach, the camping park, and the proximity of the island of Armona-Fuseta. The town is known for its quaint houses of cubical form, with their terraces and curious chimneys, a trademark of this part of the Algarve.