Bailey Island originally bore the name Newaggin, given to it by the local Abenaki Native Americans, and was first populated by European settlers in the 17th century.

William sold the land his father had left him in the Upper Parish of Kittery and settled permanently on Bailey's Island.

The story goes that in 1742, Reverend Timothy Bailey may have bought Will's Island for one pound of tobacco and a gallon of rum from William Black.

Three prominent female psychoanalysts—Esther Harding, Eleanor Bertine and Kristine Mann—were followers of Carl Jung and long-time summer residents of Bailey Island.

Illustrator Ida Waugh and writer Amy Ella Blanchard, lifelong companions, owned adjacent summer cottages on the island.