Founded in Jamaica in 1959 by Chris Blackwell and Graeme Goodall. In May 1962, Blackwell relocated the label to the UK in order to market music by Jamaican artists to immigrant communities in London and Birmingham.

In 1967, Island shifted its focus to relatively edgy rock music and most of its Jamaican acts were moved to the spinoff label Trojan Records. Island resumed its support of reggae artists with the signing of the Wailers in 1972.

In mid-1974, after 5 years of licensing material and the use of the Island brand to A&M Records (US), Blackwell launched Island Records in the US in earnest, bolstered by a manufacturing and distribution partnership first with Warner Records and then with Atlantic Records in late 1982. Similar relationships were forged with Ariola, Festival, Dacapo, and WEA for distribution in various other countries.

Blackwell sold Island to PolyGram in 1989, but remained chairman of Island Entertainment Group until 1997. Since 1999, the Island brand has been under the control of Island Def Jam Music Group in the US and Universal Island Records in the UK.