Algar in Arabic means “cave”. One of the caves found in the area, the Cueva de la Dehesilla, has been found to contain ancient tools like axes and scrapers, giving clue to archaeologists that this area has been inhabited since the Stone Age.
However, it was in the 18th century when the town of Algar, the town that is known today, came to be, when a rich trader by the name of Domingo Lopez de Carvajal bought portions of the grasslands in Algar as well as Mesa de Sotogordo and asked permission from the government to establish settlers in his land. The official approval by royal decree came in 1773. From a pioneer of 90 inhabitants, Algar started becoming populous in 1776 with the establishment of a prescribed urban development plan consisting of standardized housing structures and an assembly of important buildings in a central town square.