The Island County Board of Commissioners proposed the creation of a PTBA in September 1980, using a 0.3 percent sales and use tax to fund a bus system.

The sales tax and transit system was approved by 56.5 percent of voters in a third ballot measure, held on November 8, 1983, within the revised boundaries.

The following year, the Washington Supreme Court upheld the PTBA's boundary revision, allowing it to begin collecting sales tax that was authorized by the vote.

[5] In March 1992, Island Transit became the first agency in the state of Washington to operate paratransit service required by the new Americans with Disabilities Act.

[10] The planned withdrawal of state funding for inter-county service in 2017 led to fares being introduced on one route, the restored Camano–Everett express, in 2016 after it had been cut.

[12] The agency considered introducing fares for all of its routes in 2018 to fund service improvements, but rejected the proposal due to public opposition and impacts to ridership.

[13] In 2023, Island Transit purchased 38 acres (15 ha) near its Coupeville headquarters for future uses, including a potential solar farm or hydrogen fueling station for buses.