The French colonial authorities wrote it "Loyada"; the standard Somali spelling is "Lawya caddo".

During antiquity Loyada was part of the city-states that in engaged in a lucrative trade network connecting the merchants with Phoenicia, Ptolemaic Egypt, Greece, Parthian Persia, Saba, Nabataea, and the Roman Empire.

During the Middle Ages, the Djibouti area including Loyada was part of the Adal and Ifat Sultanates.

In 1888, the colonial powers drew the border between British Somaliland and French Djibouti from Loyada south to Jaldessa.

On 3 February 1976, insurgents of the Somali-backed FLCS armed with StG-44s and a MG42 hijacked a bus carrying 31 French children in Djibouti City and drove it to Loyada.

France sent legionnaires and gendarmes from the GIGN and the hostages were rescued the following day under covering fire from Somali border troops, but two children were killed and five wounded.