Although located in high altitude mountains of the northern coast, Toledo is situated with good access to potable water and springs, explaining its early settlement by Spanish and Portuguese colonists.

Its name was likely given to the area by early settlers from the Toledo region in Spain, who arrived in the mid-15th and the 16th centuries, constructing houses and support structures to guard their animals and cereals, from rock excavated from cavities in the side of the mountain.

In the waters north of Fajã Rasa (near Ponta do Calhau), a Spanish cargo ship, Algorta, heavily laiden with cotton shipwrecked on 22 March 1864.

Milk from dairy cattle is sold by the local farmers to produce the renowned São Jorge Cheese, a symbol of the islands protected food culture.

[1] Under the supervision of José Pereira da Cunha da Silveira e Sousa, at that time president of the local government, the citizens of the Toledo constructed their first inter-communitarian house of worship, the Chapel of São José,[2] the Império do Espírito Santo, cemetery and public fountain, in addition to a tunnel across Pico Alto (which they referred to as the Mina, or English: mine).

It was the 15–21 February 1964 Rosais earthquake that affected these numbers, resulting in many local residents abandoning their homes, emigrating to Canada, the United States or Brazil (at least 153 people remained following this event).

From this location, apart from being able to witness the islands of Graciosa and Terceira, its height allows panoramic vistas of the northern community and the mountain of Pico Alto.