San Estanislao was founded on November 13, 1749 by Father Sebastián de Yegros, a Jesuit priest from Asunción after Saint Stanislaus Kostka.

The city is named for Stanisław Kostka, a Polish priest who was canonized by Pope Benedict XIII on November 13, 1726, 23 years before San Estanislao was founded.

In 1869, during the Paraguayan War, San Estanislao was briefly the seat of the national government under Marshall Francisco Solano López.

Beef and milk production, forestry, commerce, and regional services (medical treatment, banking, and construction) also contribute to the city's economy.

Travel time between San Estanislao and Asunción (151 km away) was greatly reduced with the inauguration of Route 3 in May 2004.