Ifugao and other tribal Austronesians have lived in the region for over 6000 years, building a rice-centered farming culture with a complex kinship system. They built their rice terraces using only their hands and simple tools, an astounding feat of ancient engineering.

The name Banaue derives from the call of the local bird, which sounded like "Bannawor". The pronunciation evolved into "Banaue" after tears of successive Spanish, American, and Japanese occupation.

Banaue was designated a municipality in 1963 and has since become one of Luzon's prime destinations.