The bay-headed tanager was formally described by the Swedish naturalist Carl Linnaeus in 1758 in the tenth edition of his Systema Naturae under the binomial name Fringilla gyrola.

[3] Linnaeus based his own description on the "red-headed green-finch" that had been described and illustrated by the English naturalist George Edwards in 1743 in his A Natural History of Uncommon Birds.

[5] The bay-headed tanager is now placed in the genus Tangara that was introduced by the French zoologist Mathurin Jacques Brisson in 1760.

[6][7] Nine subspecies are recognised:[7] Adult bay-headed tanagers are 14 cm long and weigh 19.5 g. The nominate race T. g. gyrola is mainly green apart from a chestnut head, a blue or green belly, and a thin gold collar on the hind neck.

The bulky cup nest is built in a tree and the normal clutch is two brown-blotched white eggs.