Before the arrival of European settlers, the British Virgin Islands were inhabited by Arawak and Carib natives who had made their way to the islands from South America. Christopher Columbus sighted these islands on his second voyage to the New World and claimed them for Spain. A few mining outposts were set up, but the islands were considered of little importance to the Spanish crown. Pirates, however, found the secluded coves ideal for hideouts and used them as home bases from which they attacked Spanish galleons in the Caribbean Sea.

The Dutch settled on Tortola, the largest island, in 1621, but the British soon took over several of their settlements and established sugar plantations (with the Dutch retaining St. John, St. Thomas and St. Croix, which were later purchased by the United States to make the US Virgin Islands). Sugar became a major crop and the main source of income on the Islands until the abolition of slavery and the rise of sugar beet production in the United States and Europe forced many plantations to shut down.

After the 1960s, the British Virgin Islands gained autonomy and began to diversify their economy. Thanks to the passage of the International Business Companies Act in the 1980s, many financial companies have relocated to the British Virgin Islands, generating great wealth for the former colony. Though the Islands still belong to Britain, today the official currency is the US dollar.