The area of present-day Iwaizumi was part of the ancient Mutsu Province, which was dominated by the Nambu clan during the Edo period, who ruled Morioka Domain under the Tokugawa shogunate.

With the Meiji period establishment of the modern municipalities system, the village of Iwaizumi was created within Kitahei District on April 1, 1889.

In August 2016, Typhoon Lionrock hit the town with strong winds and heavy rain that caused landslides and flooding.

Iwaizumi has a mayor-council form of government with a directly elected mayor and a unicameral village council of 10 members.

Iwaizumi, together with the city of Miyako and the villages of Fudai, Tanohata and Yamada, collectively contributes three seats to the Iwate Prefectural legislature.