The town was practically destroyed in 1672 and 1673 during the volcanic eruption of Cabeço de Fogo (the name of the central volcano on the island of Faial).

During this eruption, volcanic ash and pyroclastic projectiles rained down on the community, destroying homes and sterilizing agricultural lands in Capelo and Praia do Norte.

The chapel of Varadouro was founded in 1720, by Father Manuel Pereira Cardoso, to the invocation of Nossa Senhora do Carmo (Our Lady of Mount Carmel).

Later, in his 1725 last testament, Father Cardoso requested that his inheritors celebrate a mass in perpetuity to the name Nossa Senhora do Carmo, the Holy Sacrament, and Santo António, on every first Sunday of October.

The parish has several facets: an area of volcanic craters that extends from the islands caldera, inland pasturelands used to support the agricultural/dairy industry, and a coastal zone of cottages and oceanfront pools.

In this particular area, Capelo Fault is expressed by tens of sub-vertical fractures, concentrated in a 250 meter wide zone, cutting through the pyroclastic sequence of a surtseyan cone exposed in a paleo-sea cliff east of Capelinhos volcano.

An example of these fractures can be found on the surface of the Capelinhos volcano; a warm vent on its eastern flank belies the active nature of this volcanism.

The parish's southern coast is considered the "spa region" of the island, dominated by a large bay and the black rock cliffs of Varadouro and the Mouro volcanic plug.

[5] Amid opposition declarations requesting a timeline for their reconstruction, by 2011, the Regional Government indicated their intention to expropriate lands necessary to "re-qualify and reactivate" the Thermae of Varadouro (and suggesting that only 10% had not been acquired until this point).