When the Romans conquered the province of Dalmatia they too settled Lastovo. The Romans named the island Augusta Insula. The Romans left very clear traces of their long rule on the island, the so called "villae rusticae" (residential farming units) or the water catchment areas known as the "lokve" are amongst other monuments that remain. The Romans established a settlement on location of today's village Ubli that flourished during first centuries AD, only to become completely desolate in later centuries.

With the arrival of the Slavs to Adriatic in the 7th century, Croats eventually settled most of Dalmatia which included Lastovo. Around 950, the Byzantine emperor Constantine VII Porphyrogenitos mentions Lastovo in his De Administrando Imperio by its Slavic name Lastobon. In the year 998 the Venetian Doge Pietro Orseolo II took massive operations against Croatian and Neretvian pirates along the Adriatic and its islands, which culminated with the destruction of the town of Lastovo. After this Lastovci decided to build a city on the internal hill away from the coast which made the city more defendable. During the next two centuries inhabitants dedicated themselves more to agriculture and neglected their earlier naval tradition. Scarcity of accurate historical documents and an almost complete silence covering the events on the island in the early Middle Ages are trustworthy signs of a great autonomy of Lastovo in that period. Lastovo may have at times come briefly under various rulers from the 7th–13th centuries, whether Byzantine, Dukljan or Neretvian, however, it is accepted that Lastovo generally recognised the Croatian Kings as its nominal and natural rulers.
Lastovo commune’s official seal known as the Pečat within the Republic of Dubrovnik
In 1185 the Hvar diocese is formed of which Lastovo is mentioned as having joined. A church synod held in Split that same year decreed that the Hvar diocese should come under the Archbishop of Split. Later in the 13th century the people of Lastovo voluntarily joined the Dubrovnik Republic in 1252 after the republic promised that it would honour Lastovo's internal autonomy. This agreement was codified in the Dubrovnik Statute in 1272.
In 1310 Lastovo got its first written legislation, the Statute of Lastovo, which had all the characteristics of law. The supreme authority on the island had a council consisting of 20 members who held office for life.
In 1486 authorities of the Council were passed in Parliament of the Republic and the island lost much of its autonomy. Continuous limitation of the island's autonomy and higher taxes led to a short lived rebellion in 1602. On the appeal of islanders Venice occupied the island the following year and held it until 1606, when it was returned to Dubrovnik. The next attempt at rebellion was in 1652, which resulted in the loss of the island's autonomy.
During the Ottoman conquests, Lastovo was very often a target of pirates from Ulcinj, leading to the introduction of mandatory guard service. Guard service was abolished in the 18th century when pirates from Ulcinj became merchant sailors. The last reported outbreak of vampirism in Croatia was 'recorded' on Lastovo. The trial in Dubrovnik in 1737 took testimony from visitors to the island during an outbreak of severe diarrhoea which killed many locals. The islanders blamed this epidemic on vampires. This case included from Lastovo the defendants who formed a band or group of vigilante style vampire hunters. Such cases were reported throughout all of Croatia and indeed Europe in the middle-ages.
In 1806 the French took control of Dubrovnik Republic, and Lastovo became part of the French Empire. The French built a fortification on Glavica hill and mobilised islanders against the British. The British took the island in 1813 and held the island until 1815 when in the Berlin congress the island became part of Habsburg Empire. During this period Lastovo was part of Dubrovnik county in Dalmatia province. Until 1829 it had independent court legislation, but later the island fell under the jurisdiction of the court in Korčula. In the 1840s, the municipality fell in deep economic crisis and was pushed to sell most of its forests to foreigners.
On 11 November 1918, Italian troops occupied the island based on the 1915 Secret Treaty of London which promised much of Dalmatia to Italy upon Italy entering the war on the side of the allies. Lastovo was finally incorporated into the Kingdom of Italy based on the Rapallo agreement in 1920. Although the Italians claimed territories of the former Venetian Republic, Lastovo, except for brief period of time, was never a part of it. The Italian era was marked by suppression of Croatian national identity but also by growth in the living standards, and the island reached its peak population of approximately 2,000. The Italian possession of Lastovo ended in 1943 when Yugoslav partisans took over the island and incorporated it into Croatia. Lastovo became a part of the People's Republic of Croatia since 1945—one of the six Republics of the Federal People's Republic of Yugoslavia and since 1953, the Socialist Republic of Croatia - one of the Republics of the Socialist Federal Republic of Yugoslavia.
After World War II, Lastovo experienced the same fate as the neighbouring island Vis: Being reserved for the army, foreign nationals were forbidden to visit the island, leading to economic stagnation and the depopulation of the island. In 1988 the ban was lifted and foreign tourists were again allowed to visit the island.
Croatia declared independence from Yugoslavia in 1991, however the Yugoslav People's Army finally left their military bases on Lastovo in July 1992 as one of its last footholds in Croatia. The war in Croatia ended in 1995, and Lastovo escaped much of the devastation that swept across the rest of Croatia and Bosnia. Still due to war and economic crisis in the country, Lastovo experienced a population decline from 1205 in 1991 to 835 people in 2001.

Although the number of tourists is increasing, Lastovo still hasn't experienced a tourist renaissance like Vis and the island is an oasis of peace during summertime. Currently the Croatian Parliament is preparing a bill that would make Lastovo and its archipelago a Nature park.
The most important event on the island is an authentic carnival locals call the Poklad. All the island residents participate by wearing folk costumes. The origins of the Lastovo carnival go back to a historical event. Legend has it that Catalan pirates attacked neighbouring Korčula and sent a Turkish messenger to Lastovo to tell the islanders to surrender or they would be next. The inhabitants of Lastovo did not let themselves be intimidated - instead they armed themselves and went on the attack. The women and children prayed to Sv. Jure (St. George) for help and their prayers were answered: a storm destroyed the pirates' ships and the inhabitants of Lastovo caught the messenger. In order to mock him, he was taken through the village on the back of a donkey and was afterwards sentenced and burned to death. This event is celebrated through the Poklad every year over a period of two days just before lent and is not enacted for the benefit of tourists either. Locals take it very seriously and Lastovci from all around the world return to Lastovo to attend the carnival.