Bayamo was founded in 1513 and it remained the most important agricultural and commercial town in Cuba for much of the 16th century. Its location on the Cauto River made it accessible to vessels of up to 200 tons, while pirates would not attack the city for its inland location.

In 1616, a huge flood sank ships and blocked the river, thus cutting Bayamo's access to the sea, but trade continued overland. Cuba's 1st War for Independence, lasted from 1868 to 1878. The war started in Bayamo, after Creole planter Carlos Manuel de Céspedes freed his slaves in October 1868. During the fighting, the city was all but destroyed.

Bayamo is the capital of Cuba's Granma Province. On 2 December 1956, Fidel Castro and 81 rebels arrived in Bayamo at Cabo Cruz. Their airplane was called Granma, which gave the province its name. There are countless historical sites in and around Bayamo.

There are several hotels and restaurants in Bayamo, but the city receives very few tourists. Bayamo is 670 km southeast of Havana.