Monsignor José de Souza Azevedo Pizarro e Araújo, in his book Historical Memoirs of Rio de Janeiro and Annexed Provinces under the Jurisdiction of the Vice-Roy of the State of Brazil, mentions that the foundation of Paraty occurred "around the years 1600 or so".

In any case, one can certainly state that at the beginning of the 17th century, apart from the Guaianas Indians, there was already a growing number of Paraty natives who settled there.

Around 1640 the settlement called Paratii was transferred to the location where the historical center is today, between the rivers Paratiguaçu (today called Perequê-Açu) and Patitiba, donated by Maria Jácome de Mello. This benefactor imposed two conditions for the donation: that a new chapel be built in honor of Nossa Senhora dos Remédios, and the safety of the gentle Guaianas Indians be preserved. Unfortunately, only the first condition was respected. In 1660, the flourishing settlement rebeled, demanding independence from Angra dos Reis and the status of a village for itself. Thus, in 1667 it rose to the position of Village of Nossa Senhora dos Remedios de Paratii. It is important to mention that Paraty was the first Brazilian city to have political autonomy by popular vote.

Later, Paraty became a fairly busy trading post and its development was due to the following factors: its strategic position, at the bottom of the bay of Ilha Grande; the land route starting in Paraty to Minas Gerais, passing through the mountain to Guaratingueta, Freguesia da Piedade (now named Lorena), and through the Pass of Embu - the so called "Gold Route of Piedade"; and also due to its port, which became the second most important port in the country at the time.

In the early 1800s, for example, one record says that "160.914 heads of men and animals went through the city": those were the riches being brought from Minas Gerais, first, and later the coffee from Valley of Paraiba being shipped to Europe, while slaves, spices and the European luxury arrived for the Coffee Barons. There was intense use of the old Gold Route, the same one used before by Guaianas Indians who descended from Guaratingueta for fishing and preparation of fish flour. It is Friar Agostinho de Santa Maria who, in 1729, in his Historical Sanctuary writes about the importance of Paraty, as a place distant from Rio de Janearo, but will become quite populated due to the existence of a busy trade and commerce where there is a sea port , where a lot of people come from the inland villages in search of salt, oil, and wine, and more.

With the decadence of extraction and export of gold, around XVIII century, Paraty declines in importance.

With the Coffee Cycle, starting in the XIX century, the city relives, temporarily, its prosperous days of Portuguese colonial times.

In 1870, with the opening of a new link - by rail - between Rio and Sao Paulo, crossing the Valley of Paraiba, the old horseback trail through the Serra do Mar (the mountain range along the coast), lost its function, thus affecting dramatically the economic activity of Paraty.

A second factor for the decadence of the trade and the city of Paraty was the abolition of slavery in 1888, resulting in such an exodus that out of the 16,000 inhabitants in 1851, by the end of the XIX century there we only 600 old people, women and children left, keeping Paraty isolated from the rest of the country for decades.

While roads were being built in the rest of the country, the access to Paraty was done in the same old way as during the Portuguese occupation : by boat, coming from Angra dos Reis; or, from 1950 on , through a dirt road, coming down the mountain from Cunha, a road which could be used only during dry weather, which was partly the old route for transporting gold and coffee.

Not even the attempt to build a railroad between Paraty and Guaratinguetá, during the first half of the XX century, was successful.

This involuntary isolation was, however, what preserved not only the urban architectonic structure of the city, as well as its customs and lifestyle.

With the opening the Rio-Santos highway in the beginning of the 1980s, Paraty receives a new economic impulse. As in the previous phases of occupation, during the Gold or Coffee Cycles, a new cycle now starts : tourism, preserving its past history shown in the architecture, harmonizing with the gorgeous surrounding landscape of forests, 65 islands and more than 300 beaches.

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