Lāna'i has been under the control of nearby Maui since before recorded history. The first inhabitants of this island may have arrived as late as the 15th century. According to the Hawaiian legends, man-eating spirits occupied the island before that time. For generations, Maui chiefs believed in these man-eating spirits. Depending on which legend one follows either the prophet Lanikāula drove the spirits from the island or the unruly Maui prince Kauluā'au accomplished that heroic feat. The more popular myth is that the mischievous Kauluā'au pulled up every 'ulu (Artocarpus altilis) tree he could find on Maui. Finally his father, Kaka'alaneo had to banish him to Lāna'i, expecting him not to survive in that hostile place. However Kauluā'au was able to outwit the spirits and drive them from the island. The chief looked across the channel from Maui and saw that his son's fire continued to burn nightly on the shore, and he sent a canoe to Lāna'i to bring the prince, redeemed by his courage and his cleverness, back home to Maui. As a reward, Kauluā'au was given control of the island and he encouraged immigration from other islands. True to himself Kauluā'au had, in the meantime, pulled up all the 'ulu trees on Lāna'i, accounting for the lack of 'ulu on that island. The name Lāna'i is of uncertain origin, but the island has historically been called Lāna'i o Kauluā'au. One theory is that the phrase means "day of the conquest of Kauluā'au."
The first people to migrate here, most likely from Maui and Molokaʻi, probably established fishing villages along the coast initially but later branched out into the interior where they raised taro in the fertile volcanic soil. During most of those times, the Mo'i of Maui held dominion over Lāna'i. Even today, Lāna'i is part of the County of Maui, but apparently the Maui leaders primarily left the people of Lāna'i to their own devices. Life on Lāna'i remained relatively calm until King Kamehameha I or Kalani'ōpu'u-a-Kaiamamao came over to take control, slaughtering people on every part of the island. So many were killed that when Captain George Vancouver sailed past the island in 1792, he didn't bother to land because of Lāna'i's apparent lack of villages and population. It is mentioned that Lāna'i was the favorite fishing spot of Kamehameha out of all the eight islands.
Lāna'i was first seen by Europeans on February 25, 1779, when Captain Charles Clerke sighted the island from aboard James Cook's HMS Resolution. Clerke had taken command of the ship after Cook was killed at Kealakekua Bay on February 14 and was leaving the islands for the North Pacific.
By the 1870s, Walter M. Gibson had acquired most of the land on the island for ranching. In 1899, his daughter and son-in-law formed Maunalei Sugar Company, headquartered in Keomuku on the windward coast downstream from Maunalei Valley. However it only lasted until 1901. Nevertheless, many Native Hawaiians continued to live along the less arid windward coast, supporting themselves by ranching and fishing until pineapples displaced ranching.
In 1922, James Dole, the president of Hawaiian Pineapple Company (later renamed Dole Food Company), bought the entire island of Lāna'i and developed a large portion of it into the world's largest pineapple plantation.
In 1985, Lāna'i passed into the control of David H. Murdock, as a result of his purchase of Castle & Cooke.
There is one school, Lanai High and Elementary School, serving the entire island from Kindergarten through Senior in high school. There are no traffic lights on the entire island.