Borgarnes is first noted in Egils Saga but in the saga it is called Digranes. The first Settler to live there was called Grani, a shipmate of Skallagrímur, the first landlord and settler of the Borgarfjörður-area. There is no known history of settlement in Borgarnes after Grani's days until the 19th century.
Just after Iceland gained freedom from the Danish trading monopoly, there was a great demand for a trading place in the area and the Danish King authorized Borgarnes as a trading place in 1861.
The first major building built in Borgarnes was a canning factory. It was built in 1857 but was torn down a few years later. A trading house was built in Borgarnes in 1877, and a few years later settlement in Borgarnes began in earnest.
In 1913, Borgarnes officially became a town called Borgarneshreppur but had its name changed to Borgarnesbær in 1987. Later on, in 1994, Borgarnesbær united withHraunhreppur, Norðurárdalshreppur, and Stafholtstungnahreppur under the nameBorgarbyggð, using the Borgarnes seal and offices. In 1998, Álftaneshreppur,Borgarhreppur and Þverárhlíðarhreppur also became a part of Borgarbyggð
