The Spanish Governor Mr. Carlos de Berenguer founded in 1768 the city of Ancud with the inhabitants of the abandoned village of El Chacao, as a fort to protect the traffic through Cape Horn, and constituted the main port in Chiloé.
Together with forts San Antonio and Ahui on the peninsula opposite, they were the most important defense points in Patagonia, what gave to Ancud a prestige and preponderance that made of it the military and political capital of the territory.
While the Republic was being conformed, there were two failed attempts to incorporate it. In 1820, the first attempt was made by Lord Cochrane, and in 1824 by General Freire, but the objective was only attained in 1826 after the victory over Spanish General Antonio de Quintanilla in the battles of Pudeto and Bellavista in the outskirts of the city.
On 19th January, 1826, the last governor, Quintanilla, surrendered to the forces of the Republic and lost the square by capitulation.
In 1943 it became capital of the province and episcopal see.
The domain over the southern territory became stronger, and an expedition was organized to take possession of the Strait of Magellan in 1843.
The timbering boom of the end of the XIX century coinciding with the arrival of European settlers provoked an important development of the city and the area.
In 1912, the Railroad arriving to the terminal in Puerto Montt started operating, and concentrated there the commercial and shipping traffic, thus losing Ancud its position as international port, and producing its slow decadence, until in 1982 the provincial capital was transferred to Castro.
Chiloé is a magic distant island, the only spot of the Archipielago Patagónico colonized by Spaniards, whose inhabitants lived in complete isolation during three centuries and developed a particular culture where magic is always present.