In addition, the above referred residents of Ovar and Ilhavo could only be sent to Olhao after Marques de Pombal had sent people to the recently established village of Vila Real de Santo Antonio. By then, Olhao was a prosperous village with more than two thousand residents.

The name Olhao comes from the Arab AL-HAIN, which means spring. In time it became ALHAM, then OLHAM and finally OLHAO. However, there is also the local version of the story which says, Olhao is the superlative of eye - a big “eye of water”, because there are lots of “ olhos de agua ”. It is believed that this eye created the first straw cottage. The first construction in stone was made between 1600 and 1610 - the chapel of Nossa Senhora do Rosario , presently called Capela de Nossa Senhora da Soledade .

In 1665, Olhão became a village by the order of the bishop of Algarve – D. Sebastiao da Gama . Before this it belonged to Quelfes . In 1718 several houses of masonry were constructed and in 1722 specifically on June 8, the area of the town was expanded and demarcated.

By that time the Village of Olhao was dominated by the French, because the Portuguese had abandoned it and gone to Brazil . The Olhao residents did not like French rule at all, mainly because of the high taxes they had to pay and the restrictions to fishing. The people decided to prepare an ambush on the Quelfes Bridge to defeat the French on June 16, Day of Corpo de Deus. On September 22 victory was announced by one man, owner of a fishing boat ( caique ), called Bom Sucesso , to the King D. João who was at the time living in Rio de Janeiro, Brazil. As a reward, Olhao became a town, and it was called Town of Olhao of the Restoration.

Olhão , also known as “Vila Cubista ” or “ Cidade do Mar” (town of the Sea) – capital of Ria Formosa, is today a town that is known for maintaining traditional fishing practices, and is considered one of the main fishing ports of Portugal.