Gasparilla was an important stop for phosphate shipping until the dredging of the Port of Tampa, and was a major vacation destination for the elite from Tampa and Fort Myers. Though shipping has declined substantially since the turn of the 20th century, tourism remains important to the island's economy.

According to Florida folklore, Gasparilla Island gets its name from the legendary pirate captain José Gaspar ("Gasparilla", c. 1756 - 1821), who had his base on the island and hid his fabulous treasure there. Much of the development of this legend is the result of promotion by a local hotel and railroad line, however, and is likely apocryphal. The name "Gasparilla" appears on maps dating to well before the time of the buccaneer; historians have suggested the island was named for a Spanish missionary named Gaspar or Gasparillo.

A trio of pet Mexican Spinytailed Iguanas, Ctenosaura pectinata, released on Gasparilla Island by a resident in the 1970s has led to a current population explosion of over 12,000 lizards.