The flag first appeared in the middle of the 1970s, after the death of Francisco Franco, in an era when the rights of the regional communities were being reclaimed and re-established across Spain.

Galache Cortés believed that the color green referred to the Muslim era of Spain, in which Extremadura enjoyed its only period of complete independence as an Aftasid taifa.

In a television interview, Luis Ramallo, president of the region before the era of autonomy, attributed the creation of the flag to a lawyer from Oliva de la Frontera, Martín Rodríguez Contreras.

This theory was supported by professor of anthropology Javier Marcos Arévalo, who in his studies on Extremaduran identity states that Rodríguez Contreras’ design was chosen after various proposals and its colors were derived from the following: In terms of symbolic meaning, the green symbolizes hope, the white honor of the people, the black to unemployment, marginalization, and backwardness, although it can also refer to the region's Almohad past.

Its first official sanction occurred in the city of Cáceres after a motion was passed by the Junta Preautonómica and later made into law by the Statute of Autonomy.