The Nakfa area has been inhabited since ancient times and became an administrative and commercial centre in the 1890s when the Italian colonial government established a post there and grew steadily.

In the 1960s, following the incorporation of Eritrea into Ethiopia, the construction of a police post and Mosque in the town was funded by the government of Emperor Haile Selasie.

The police presence made it the target of early attacks by the Eritrean Liberation Front and led to the Ethiopians establishing a military garrison there in 1967.

[3] The EPLF dug itself in underground where it built hospitals, printing presses, factories, a radio station and a college and constructed rings of trenches and minefields.

[4] After Eritrean independence in 1991 the town became the provincial capital of the Sahel Province and there was investment in reconstruction and an airstrip was built.