Before colonial powers imposed their influence in Southeast Asia, the Koh Lipe region was inhabited by various indigenous groups, particularly the Sea Gypsies, or Chao Ley, who are believed to have lived in the area for centuries. The Sea Gypsies, known for their nomadic maritime lifestyle, relied on the ocean for fishing and trade. Koh Lipe, along with nearby islands, served as a strategic stopover in the broader network of maritime trade routes that spanned the Andaman Sea, linking various coastal communities and islands. During this time, the island did not have a centralized political structure or administrative importance. Instead, it was part of the informal seafaring routes used by fishermen and traders who navigated the waters for livelihood, moving goods, and exchanging culture between the Andaman Sea’s coastal settlements. The people of Koh Lipe maintained a harmonious relationship with nature, with their economy based primarily on fishing, agriculture, and seasonal trade with neighbouring islands. This era marked a time of peaceful co-existence with the environment, where the island was mainly a resource hub for its inhabitants rather than a political or economic power centre.

The 19th century saw the British Empire expand its influence across Southeast Asia, including the region surrounding Koh Lipe. The British had established colonies in Malaya and nearby territories, and their interest in the area was driven by the region’s strategic position along important trade routes. As British control in the Malaya Peninsula grew, the borders between British-controlled territories and Siam (modern-day Thailand) became a key point of negotiation. A pivotal moment in the colonial history of the region was the Anglo-Siamese Treaty of 1909, which played a crucial role in shaping the boundaries between British Malaya and Siam. This treaty, signed between the British and Siamese governments, aimed to resolve territorial disputes by clearly delineating borders. Koh Lipe and the surrounding islands were included in the territories that were formally recognized as part of Siam, later becoming part of Thailand. The treaty marked the end of ambiguous territorial claims and solidified Siam’s control over the Andaman Sea coastline and its nearby islands, including Koh Lipe. While the island was still not a major centre of political activity, the formalization of borders had a significant impact on the administration of local resources and governance. It also influenced the social and economic dynamics of the region, as trade and fishing activities began to be more closely regulated under Siamese control, which laid the groundwork for the modern development of Koh Lipe.

The Anglo-Siamese Treaty of 1909 formally marked the annexation of Koh Lipe and surrounding islands by Siam (now Thailand). As part of the treaty, which delineated borders between British-controlled Malaya and Siam, Koh Lipe was included in the territory that came under Siamese control. This effectively made Koh Lipe a part of Thailand, a status it holds to this day. Koh Lipe's location, near Thailand's southern border and its proximity to Malaysia, made it strategically significant, particularly as a fishing hub. The island had long been used by local fishing communities, including the Chao Ley, or Sea Gypsies, who had lived and fished in the area for centuries. With the annexation, Thailand began to more formally regulate the use of marine resources around the island, consolidating its control over the Andaman Sea's rich fishing grounds. During this time, the island remained relatively isolated and was not heavily influenced by the central government. It continued to be a resource-rich area for local inhabitants, primarily the Urak Lawoi, a subgroup of the Sea Gypsies, who maintained their traditional lifestyle centered around fishing and sea-based activities. However, as Koh Lipe became part of Thailand’s jurisdiction, it was eventually integrated into the wider Tarutao National Marine Park, which was established in 1974, further emphasizing the island's strategic and environmental importance.

In the aftermath of decolonization in the mid-20th century, many of the borders drawn during colonial rule remained largely unchanged. This included the region of Southeast Asia, where the boundaries between Thailand and Malaysia were defined by the Anglo-Siamese Treaty of 1909. For Koh Lipe, this meant that it continued to be part of Thailand, despite its geographical proximity to the Malay Peninsula. During the post-colonial period, Koh Lipe maintained strong cultural and social ties to the neighbouring Malaysian territories, particularly through trade and fishing. Many of the Urak Lawoi people, the indigenous Sea Gypsies of Koh Lipe, continued their traditional lifestyle, relying on the sea for their sustenance and trade. These communities had historically interacted with nearby Malay regions, and their fishing practices often crossed over the maritime boundaries. As Thailand transitioned into the modern era, Koh Lipe began to see increased interest due to its natural beauty and strategic location. The establishment of Tarutao National Marine Park in 1974 marked an important step in the island’s development, as it was recognized for its biodiversity and potential for tourism. The Thai government began to take steps toward preserving the environment while also promoting the island as a destination for eco-tourism. By the 1990s and 2000s, Koh Lipe began to see a steady increase in tourism. The island’s beautiful beaches, crystal-clear waters, and vibrant marine life made it an attractive destination for international travellers. This led to gradual infrastructure development, including the construction of resorts, restaurants, and piers, alongside efforts to balance environmental conservation with the island's growing popularity. In recent decades, Koh Lipe has become increasingly integrated into Thailand's broader Andaman Sea tourism circuit, attracting visitors not only for its natural beauty but also for its rich cultural heritage and unique fusion of Thai and Malay influences. The island continues to evolve, preserving its cultural heritage while adapting to the demands of modern tourism.