The event was first run in 1965, when local motorsport enthusiasts organised a race around São Miguel island — "Volta à Ilha" meaning "Round the Island." This predated many of its counterparts in the wider Iberian rally calendar but came six years after the establishment of the Rali Vinho da Madeira on the Portuguese island of Madeira. Despite its remoteness, the Azores event quickly attracted national interest and became a fixture of Portugal's domestic rally scene from the early 1970s onward.
São Miguel's terrain shapes the event's character. Narrow, twisting lanes through lush volcanic landscape produce stages that punish imprecision. Unlike the Rali Vinho da Madeira and the Rally Islas Canarias — two Atlantic island events with which the Açores rally is frequently grouped — the São Miguel round is contested entirely on gravel, giving it a distinct identity within the broader Atlantic island rally tradition.
The rally gained its first significant international profile in 1992 when it joined the European Rally Championship (ERC) calendar for the first time. That inaugural international edition was won by Yves Loubet, making him the first non-Portuguese driver to claim victory at the event. His win, however, proved to be an exception: Portuguese drivers dominated the ERC era of the rally, with Fernando Peres becoming the most successful competitor in the event's international history, accumulating seven wins across the ERC period. Carlos Bica added four victories of his own.
International status was not permanent. The rally was demoted to the European Rally Cup West in 2004 and dropped from the ERC entirely in 2006. The Azores' isolation from mainland Europe and the costs associated with transporting teams to a mid-Atlantic island contributed to the difficulties of maintaining full championship status during that period.
A revival came in 2008 when the rally regained international standing through the European Rally Cup South series, attracting a new wave of competitors to São Miguel. The Intercontinental Rally Challenge (IRC) absorbed it the following year, and the event remained part of that series until the IRC folded in 2012. The European Rally Championship returned as the Açores' primary international stage in 2013, restoring the rally's standing within the top tier of European competition.
The Azores rally's gravel surface distinguishes it from many ERC rounds held on tarmac. The island's weather — Atlantic and unpredictable — frequently introduces moisture to stages, creating variable grip levels that reward adaptable drivers and add an element of lottery to tyre strategy. The stages themselves thread through agricultural land, forests, and the rugged volcanic interior of São Miguel, with elevation changes and tight technical sections common throughout.
The rally has also served as the centrepiece of a domestic Azores championship, fostering a strong local rally culture on the island.
The Rallye Açores is among the most storied events in European rally outside the World Rally Championship. Its longevity — over six decades — combined with its unique setting and the loyalty of local Portuguese drivers has given it a cultural significance beyond its championship status. The repeated dominance of Fernando Peres in particular stands as a record unlikely to be challenged, cementing the event's place in the history of Iberian and Atlantic island motorsport.