It was organized as a town in 1600, with the name of San Miguel de Xilobasco or Ilobasco, when the first church was built in its center.

At the same time, the settlement of families of Hispanic origin in the town caused growth, becoming a parish around 1770, until January 18, 1871, when it was granted the city category after the Independence process.

Ilobasco has a valuable architectural heritage, which has endured over time, as well as its crafts, being one of the major local tourist attraction in El Salvador.

The clay work includes the "miniatures", which are small representations of daily scenes as lived by Salvadorans, no bigger than 2 inches tall.

One version of the miniatures are the "surprises", which are basically a scene covered with another piece of clay shaped and painted in the form of a fruit, an egg, a house or other things.