The recorded history of Madeira begins in 1419. There is no record of anyone living on the islands at that time. Portugal began populating the island in 1420.

Pre-Portuguese times Pliny mentions certain Purple Islands, the position of which with reference to the Fortunate Islands or Canaries might seem to indicate Madeira islands. Plutarch (Sertorius, 75 AD) referring to the military commander Quintus Sertorius (d. 72 BC), relates that after his return to Cádiz, "he met seamen recently arrived from Atlantic islands, two in number, divided from one another only by a narrow channel and distant from the coast of Africa 10,000 stadia. They are called Isles of the Blessed." The estimated distance from Africa, and the closeness of the two islands, seem to indicate Madeira and Porto Santo, which is much smaller than Madeira itself, and to the north east of it.

Tenth- or eleventh-century fragments of mouse bone found in Madeira, along with mitochondrial DNA of Madeiran mice, may indicate that the Vikings had come to Madeira (bringing mice with them), prior to colonisation by Portugal.Ann Christys, Vikings in the South (London: Bloomsbury, 2015), p. 7. However, because of “widespread trade routes, a mouse from Scandinavia could easily have boarded a ship in what today is Portugal and sailed over to Madeira, as well as the Azores” (as pointed out by the geographer Simon Connor). The geographer concludes that there is no evidence of a Scandinavian settlement or sighting of the islands and that the Portuguese were the ones that brought those mice from northern Europe to Madeira.

There is a romantic tale about two lovers, Robert Machim and Anna d'Arfet, in the time of the King Edward III of England, fleeing from England to France in 1346, who were driven off their course by a violent storm, and cast on the coast of Madeira at the place subsequently named Machico, in memory of one of them. On the evidence of a portolan contained in the Medici Atlas dated 1351, preserved at Florence, Italy, it would appear that Madeira had been discovered long before that date, possibly by Portuguese vessels under Genoese captains.

15th and 16th centuries In 1419, two captains of Prince Henry the Navigator, João Gonçalves Zarco and Tristão Vaz Teixeira, were driven by a storm to the island they called Porto Santo, or Holy Harbour, in gratitude for their rescue from shipwreck. The next year an expedition was sent to populate the island, and, Madeira being described, they made for it, and took possession on behalf of the Portuguese crown, together with captain Bartolomeu Perestrello.

The discoveries of Porto Santo and Madeira were first described by Gomes Eanes de Zurara in Chronica da Descoberta e Conquista da Guiné. (Eng. version by Edgar Prestage in 2 vols. issued by the Hakluyt Society, London, 1896–1899: The Chronicle of Discovery and Conquest of Guinea.) Arkan Simaan relates these discoveries in French in his novel based on Azurara's chronicle: L’Écuyer d’Henri le Navigateur, published by Éditions l’Harmattan, Paris.

The islands started to be settled circa 1420 or 1425. On September 23, 1433, the name Ilha da Madeira (Madeira Island or "island of wood") appears in a map, by the first time, in a document. Since its discovery, the archipelago was property of the Order of Christ, which promoted its settlement.

The three captain-majors had led, in the first trip, their respective families, a small group of people of the minor nobility, people of modest conditions and some old prisoners of the kingdom. The settlement of Madeira and Porto Santo islands was a process defined by stages involving people from all over the kingdom.

In 1425, King John I officially made Madeira a full province of Portugal, handing it as a gift to Henry the Navigator. Settlement then began in earnest. Three strapping young nobles were sent to marry Zarco's daughters, and members of some of Portugal's grandest families came along to help increase the population.

It was from the Algarve that some of the early settlers set out. Many came with the important task of the landlord system employment. Servants, squires, knights and noblemen are identified as the ones who secured the beginning of the settlement. Later on, settlers came in big numbers from the north of Portugal, due to overpopulation, namely from the region of Entre Douro and Minho, who intervened specifically in the organization of the agricultural area.

The majority of settlers were fishermen and peasant farmers, who willingly left Portugal after it had been ravaged by the Black Death, and where the best farmlands were strictly controlled by the nobility. To gain the minimum conditions for the development of agriculture, they had to rough-hew a part of the dense forest of laurisilva. They started fires, which are said to have burned for seven years. The settlers constructed a large number of canals (levada]s), since in some parts of the island there was water in excess, while in other parts it was scarce. In the earliest times, fish constituted about half of the settlers' diet, together with vegetables and fruit. The first local agricultural activity with some success was the production of wheat. Initially, the settlers harvested wheat for their own sustenance, but later began to export it to Portugal.

According to a Portuguese legend, Polish King Władysław III survived the Battle of Varna (although the Ottomans claimed to have his head, his body in royal armor was never found) and later settled in Madeira. King Afonso V of Portugal granted him the lands in the Madalena do Mar district of Madeira, for the rest of his life. He was known there as Henrique Alemão (Henry the German) and married Senhorinha Anes (the King of Portugal was his best man), who gave him two sons. He established the church of Saint Catherine and Saint Mary Magdalene in Madalena do Mar (1471). There he was depicted in a painting as Saint Joachim meeting Saint Anne at the Golden Gate on a painting by Master of the Adoration of Machico (Mestre da Adoração de Machico) in the beginning of the 16th century.

In the decade of 1450, the wheat production began to fall. To get past the ensuing crisis, at the discretion of Infante Dom Henrique, settlers began the planting of sugarcane – rare in Europe and, therefore, considered a spice – promoting, for this, the introduction of Sicilian beets as the first specialized plant and the technology of its agriculture. Sugarcane production quickly afforded the Funchal metropolis economic prosperity. The production of sugarcane attracted adventurers and merchants from all parts of Europe, especially Italians, Basques, Catalans, Genoese, Portuguese and Flemish. This meant that, in the second half of the fifteenth century, the city of Funchal became a mandatory port of call for European trade routes.

Some years before his voyages across the Atlantic, Christopher Columbus, who at the time was a sugar trader, visited Madeira. It is generally accepted that he was born in Genoa, Italy, as Cristoforo Colombo. In Portugal it has been claimed that he was born in that country, as Salvador Fernandes Zarco but this is disputed. Columbus married the daughter of Bartolomeu Perestrello, Filipa Moniz, in Porto Santo and so was well aware of the profits to be made. He also understood the necessary growing conditions for sugar and the navigational technique known as the Volta do mar. Christopher Columbus lived and studied navigation in Madeira after his marriage.

Sugarcane cultivation and the sugar production industry developed until the 17th century. It became a leading factor in the island's economy, and increased the demand for labor. Apparently it was in Madeira that, in the context of sugar production, slaves were first used in plantations, sharing the work with waged settlers. The colonial system of sugar production was first put into practice on the island of Madeira, on a much smaller scale, and then successively applied, on a large scale, to other overseas production areas. Slaves consisted of Guanches from the nearby Canary islands, captured Berbers, and after further exploration of the African coast, West Africans. This pattern for sugar cultivation became the model that would soon be transferred to the Caribbean and Brazil. In Madeira it became evident that a warm climate, winds to work windmills for sugar crushing and easy access to the sea (for transportation of the raw sugar to Europe) were, together with slave labour, important components in what became a huge and highly profitable industry, which funded industrialisation and European expansion.

The first slaves that were brought to Madeira happened in 1452 and were Berbers and Guanches. According to historical records, slaves to Madeira were mainly imported from Northern Africa. Madeiran aristocracy at no point bred slaves or subjected them to the harsh regimented conditions found on slave plantations in Brazil, the West Indies or the rest of the Americas. Slave owners were only a small minority of the Madeiran population, and those who did own slaves owned only a few. There are recorded 2,232 slave owners in Madeira between 1400 and 1700, with their distribution being 1% in the XV century, 34% in the following and 65% in the XVII century. 89% of slavers owned one to five slaves. The most slaves ever owned by any individual was 14 belonging to João Esmeraldo. Slave prices kept rising each year, taking a toll even more in the slave population in Madeira. There are almost no traces of lineage coming from slaves in Madeira, due to low numbers and fertility rate. After the sugar trade collapsed in Madeira, there was no place for the slave, stranger to the European society ramified in the island. Many of them were sold to the more appealing American colonies and few that remained became house servants for aristocrats or fed the indigent and criminal class. Alberto Vieira, a highly respected expert in trans-Atlantic slavery, states that in the period of a deteriorated sugar trade in Madeira "the records show a high slave concentration in the urban areas revealing that we are faced with slavery of a domestic nature, with little or no relation to rural life." This meant that the slaves' daily life unrolls around the city near their masters, with their connection to rural life being nearly non-existent as guardians and workers of the land, both given to settlers.Godinho, V. M. Os Descobrimentos e a Economia Mundial, Arcádia, 1965, Vol 1 and 2, Lisboa

In conclusion, this small scale of sugar production in the island was completely outmatched by Brazilian and São Tomean plantations. Madeiran sugar production declined in such a way that it was not enough for domestic needs, so that sugar was imported to the island from other Portuguese colonies. Sugar mills were gradually abandoned, with few remaining, which gave way to other markets in Madeira.

17th, 18th and 19th centuries Since the 17th century, Madeira's most important product has been its wine, sugar production having since moved on to Brazil, São Tomé and Príncipe, and elsewhere. Madeira wine was perhaps the most popular luxury beverage in the colonial Western Hemisphere during the 17th and 18th centuries.

With the increase of commercial treaties with England, important English merchants settled on the Island and, ultimately, controlled the increasingly important island wine trade. The English traders settled in the Funchal as of the seventeenth century, consolidating the markets from North America, the West Indies and England itself. The Madeira Wine became very popular in the markets and it is also said to have been used in a toast during the Declaration of Independence by the Founding Fathers.