Up until the 20th century Ferragudo was the home mainly of fishermen who worked the waters of the Atlantic Ocean, and the estuary of the Rio Arade itself. A fishing village since time immemorial, there were salting tanks next to the fort of "Sao Joao de Arade" it had defensive walls in the middle ages, vestiges of which are still visable today. Facing the fort is the fortress of "Santa Catarina" this foil constituted the main defence of the Arade estuary. The fort began its life as a lookout tower in the 15th century and was extended in the 17th and 18th century. A great deal of work was done at the beginning of the 20th century to turn it into a home, at the initiative of the poet "Coelho Carvalho" and it is to this that it owes its current romantic appearance.

A lot of the town was destroyed in the earthquake of 1755, but it still preserves its original character with rows of houses cascading down to the river, crowned by the outline of the church high on the hill, and
pretty streets of whitewashed cottages and roofs intersected by decorated chimney pots. The church "Nossa Senhora de Conceicao" (Our Lady of Conception") is of a typical country style of architecture.

It was in this town in 1797 that the notorious bandit "Jose Joaquim Sousa Reis" was born known as "Remexido". Commanding a fierce band of followers his acts are recorded as being a mixture of good and bad legends. Most of the Algarve and also to the north in the neighbouring Alentejo district suffered by his band of brigands. He died before a firing squad in Faro in 1838.