The island was formed during the recent retreat of the falls as it cut inward (upstream) through the Niagara Escarpment.

[2] In 1959–60, the island's eastern side was extended about 8.5 acres (34,000 m2) for additional parking and a helicopter pad.

[4] In the early 1980s, the United States Army Corps of Engineers filled in more land and built diversion dams and retaining walls to force the water away from Terrapin Point.

The island's preservation as parkland is due to the early efforts of Augustus Porter, who in the middle 19th century recognized the long-term value of the falls as a tourist attraction.

Porter purchased the island and allowed a group of Tuscarora Native Americans to live on it and sell their crafts to the tourists who came to the falls by stagecoach and early railroads.

[8] In 1879, landscape architect Frederick Law Olmsted, wrote that he had travelled four thousand miles throughout the continent "without finding elsewhere the same quality of forest beauty which was once abundant about the falls, and which is still to be observed in those parts of Goat Island where the original growth of trees and shrubs had not been disturbed..." Olmsted concluded that the spray from the Falls created a natural nursery for indigenous plant life.

During the fictional invasion of the U.S. by the forces of Imperial Germany, depicted in the book, the protagonist is stranded on the island, with bridges to the mainland having been destroyed in the fighting, and is involved in a grim battle for survival with two equally stranded German soldiers.