The area was originally known as Muvevo, which is the name the natives gave to a plant they used to smoke using pipes.

It was established on January 17, 1920 as a hamlet belonging to the town of Mbocayaty with the name of Colonia Independencia Nacional (Spanish for National Independence Colony) The establishment was organized by public servant Genaro Romero from the city of Concepcion.

On June 23, 1955 the colony was upgraded to an self-governing municipality and its original area included that of the neighboring town of Paso Yobai.

The town is a tourist attraction because of its German heritage, specially in the month of October for its big Oktoberfest celebration and the natural sites surrounding the hills of Ybytyruzu.

Colonia Independencia received immigrants during the beginning of the XXth century especially after World War I from the German states of Baden-Wurttenberg and Bavaria but also to a lesser extent other German-speakers from Austria, Switzerland, and Hungary.