Nearby archaeological sites date back to the Stone Age, but permanent, and verifiable, human settlement here is only three centuries old.

Stories that would be impossible to substantiate have Tai O as the base of many smuggling and piracy operations, the inlets of the river providing excellent protection from the weather and a hiding place.

In early 16th century, Tai O was once occupied shortly by Portuguese during the Battle of Tamão, the remains is known as Fan Kwai Tong (番鬼塘, "Foreign devil pond") today.

The other villages are Tung Sai Chung, Lo Pui O, Shek Pik and Mui Wo.

Smuggling of guns, tobacco, drugs and people remains a documented illegal activity both into and out of mainland China.

[2] During and after the Chinese Civil War, Tai O became a primary entrypoint for illegal immigration for those escaping from the People's Republic of China.

In 1940, it was recorded that the Tai O salt marshes were covering 70 acres (28 ha) and that the production has amounted to 25,000 piculs (1,512 metric tons) in 1938.

A cable ferry tended by local women used to be quite popular with visitors, but it was replaced with a steel pedestrian bridge in October 1996.

A 2021 Hong Kong drama Ossan's Love (HK version) by ViuTV starring Edan Lui and Anson Lo is set in Tai O.