There are two theories on the origin of the name "Casco Bay." One is based on Portuguese explorer Esteban Gómez, who explored the Maine coast in 1525 and named the bay "Bahia de Cascos" (Bay of Helmets, based on the shape of the bay). The second is based on Aucocisco, the Abenaki name for the bay, which means 'place of herons' (sometimes translated as 'muddy'). The first settlement in Casco Bay was that of Capt. Christopher Levett, an English explorer, who built a house on House Island in 1623-24. The settlement failed. The first permanent settlement of the Portland peninsula was named Casco. A small town 25 miles north northwest of Portland, also in Cumberland County, later claimed the name Casco.
The islands in the bay are also called the Calendar Islands, based on the popular myth there are 365 of them. This was first reported in 1700 by Colonel Wolfgang William Römer, an English military engineer, who reported there were "as many islands as there are days in the year." The United States Coastal Pilot lists 136 islands. Robert M. York, the former Maine state historian said there are "little more than two hundred islands."
The bay is also home to abandoned military fortifications dating from the War of 1812 through World War II; during World War II, Casco Bay served as an anchorage for US Navy ships.
The State Historic Site of Eagle Island was the summer home of Arctic explorer Robert Peary.
Walter Cronkite stated that, in his opinion, the bay offered some of the best sailing in the world.
In 2008, up-and-coming composers Peter J. McLaughlin and Akiva G. Zamcheck wrote a piece in four movements paying homage to the wreck of the Don in Casco Bay in 1941. The piece received critical acclaim from the Portland Press Herald and from fellow Maine composers.