In 1600, the Spanish conquistadors first came to the upper reaches of Agusan and found several nipahouse clusters belonging to the Manobo tribe. The Manobo’s were in frequent conflicts with members of Bagani, another tribe originally from what the Bukidnon Province is now. The latter constantly raided the Manobo houses until sometime in 1879, after one of the most destructive raids, Fr. SaturninoUrios, a Spanish Jesuit missionary came to what then known as Umajam and met the Manobos. Fr. Urios convinced the Manobos to relocate into one single settlement area and appointed TudugOrlandez, their most active local leader, as the president of the newly formed town. In memory of his place in Spain, Fr. Urios named the settlement as Loreto.

In 1907, an American military officer, a certain Col. Waloe was assigned as the detachment commander in an area in Loreto which eventually was known as Brgy. Waloe—one of the oldest barangays in town. Brgy.Waloe also became the site of the last battle in Loreto between the combined American and Filipino forces and the enemy Japanese imperial forces during World War II.

Loreto had its first election held in 1963. The first elected municipal district mayor was Leocardio R. Orlandez, a native Manobo himself. On March 30, 1965, then President Diosdado Macapagal issued Executive Order No. 147, establishing the municipality as part of the province of Agusan del Sur. Since then, various mayors served their respective terms.