Due to the repeated shift of the seat of the bishops, it was also successively known as bishopric of Leal (Lihula) from 1234, Perona (Vana-Pärnu) from 1251, Hapsal (Haapsalu) Castle from 1279, and the seat shifted (alone) to the castle of Arensburg (Kuressaare) on the island of Ösel (Saaremaa); the cathedral and cathedral chapter (canons) remained in Hapsal.

One of the five members of the Livonian Confederation, the state was administratively divided into two bailiwicks (Latin advocaciae, German Vogteien).

The principality ceased to exist in 1560 when its last prince-bishop, Johannes V von Münchhausen, sold it to Denmark, which vested executive power in royally appointed Governors (styled Lensmænd to 1654, then Statthalter).

King Frederick II of Denmark's brother Magnus of Livonia, Duke of Holstein, obtained it as an appanage on 15 April 1560 and was elected bishop on 13 May 1560; the Danish dynasty being Lutheran, he abolished the diocese and assumed the secular feudal style Lord of Ösel (Stieffte Ozel und Wieck Herr) on 20 March 1567.

Denmark ceded Wiek (Lääne County) to the Polish–Lithuanian Commonwealth in exchange for parts of Ösel belonging to the Livonian Order.