Isfiya was built on the ruins of a Byzantine settlement. Crusader remnants have been found in the village. In 1930, remains of a 5th century Jewish town, Husifah, were unearthed in Isfiya. Among the finds are a synagogue with a mosaic floor bearing Jewish symbols and the inscription "Peace upon Israel." A cache of 4,500 gold coins were found dating from the Roman period.
The modern village was founded in the early eighteenth century. The inhabitants made their living from olive oil, honey and grapes.
The tomb of Abu Abdallah is located in Isfiya. Abu Abdullah was one of three religious leaders chosen by Caliph Al-Hakem in 996 CE to proclaim the Druze faith. He is said to have been the first Druze religious judge (qadi). The Druze make an annual visit to this shrine on November 15.
In 2003 the local council was merged with nearby Daliyat al-Karmel to form Carmel City. However, the new city was dissolved in 2008 and the two settlements became local councils again.