The Cayman Islands remained largely uninhabited until the 17th century. A variety of people settled on the islands: pirates, refugees from the Spanish Inquisition, shipwrecked sailors, deserters from Oliver Cromwell's army in Jamaica, and slaves. The majority of Caymanians are of African and British descent, with considerable interracial mixing. The first of these settlers came from Jamaica in 1661-71 to Little Cayman and Cayman Brac.

Britain took formal control of the Caymans, along with Jamaica, under the Treaty of Madrid in 1670. These first settlements were abandoned after attacks by Spanish privateers, but British privateers often used the Cayman Islands as a base and in the 18th century they became an increasingly popular hideout for pirates, even after the end of legitimate privateering in 1713. Following several unsuccessful attempts, permanent settlement of the islands began in the 1730s. The Cayman Islands historically have been popular as a tax haven. In November 1794, a convoy of 10 Jamaican merchantmen was wrecked on the reef in Gun Bay, on the East end of Grand Cayman, but with the help of local settlers, there was no loss of life. Legend has it that there was a member of the Royal Family onboard and that in gratitude for their bravery, King George III decreed that Caymanians should never be conscripted for war service and Parliament legislated that they should never be taxed.

From 1670, the Cayman Islands were effective dependencies of Jamaica, although there was considerable self-government. In 1832, a legislative assembly was established, consisting of eight magistrates appointed by the Governor of Jamaica and 10 (later increased to 27) elected representatives. The Cayman Islands were officially declared and administered as a dependency of Jamaica from 1863, but were rather like a parish of Jamaica with the nominated justices of the peace and elected vestrymen in their Legislature. From 1750 to 1898 the Chief Magistrate was the administrating official for the dependency, appointed by the Jamaican governor. In 1898 the Governor of Jamaica began appointing a Commissioner for the Islands.

In 1959, upon the formation of the Federation of the West Indies the dependency status with regards to Jamaica ceased officially although the Governor of Jamaica remained the Governor of the Cayman Islands and had reserve powers over the Islands. Starting in 1959 the chief official overseeing the day to day affairs of the islands (for the Governor) was the Administrator. Upon Jamaica's independence in 1962, the Cayman Islands broke its administrative links with Jamaica and opted to become a direct dependency of the British Crown, with the chief official of the islands being the Administrator. In 1971 the governmental structure of the Islands was again changed with a Governor now running the Cayman Islands as a direct representative of the British Monarchy.