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This picturesque fishing village, with a long history of settlement, has grown over the last decades into the main tourist area of the concelho. It has a number of fine beaches protected by clifts.

There are traces of Roman habitation and naval activity in the area. There has also been a long history of pirate and enemy military assaults on the coast, and a number of naval battles here, most notably the battle in 1544 between a squadron of ships under D. Petro da Cunha, and the Turkish corsair (barbary pirate), Xarramet.

According to historical sources, the name of the village derives from “Caboiere,” an old name for a hamlet of fishermen from the Islamic-medieval period. For most of its history, fishing was the mainstay of the local economy.

However, from the 1960s onward, tourism gradually became the economic base of the area, with many new hotels, apartment complexes, shops, roads, and a significant improvement in the infrastructure. For a fascinating insight into Carvoeiro and Algarve just before the arrival of mass tourism read Algarve: A Portrait And a Guide by Patrick Swift. Swift was an artist and long time Carvoeiro resident who founded Porches Pottery.

To the west of the town is the site of an old ruined fort, ordered built in 1670 as part of the coastal defenses of the Algarve. Only a gate survives. At the same site is the Shrine of Nossa Senhora da Encarnação, a chapel overlooking the sea, whose construction is said to have antedated the fort.

Algar Seco", a few hundred meters along the coast east of the main square and beach, is a popular nature site where ocean wave erosion has carved out grottos, islets and “water chimneys”.