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The region around Estremoz has been inhabited since pre-historic times. There are also vestiges of Roman, Visigoth and Muslim occupation.

During the Reconquista, Estremoz was captured in the 12th century by the army of knight Geraldo Sem Pavor (Gerald the fearless), who had also conquered neighbouring Évora. However, Estremoz was soon retaken by the Moors and only in the mid-13th century reconquered by Portuguese King Sancho II.

King Afonso III granted a letter of feudal rights (foral) to Estremoz in 1258, promoting the colonisation of the area. In the early 14th century, King Dinis I rebuilt the castle as a Royal Palace, turning the village into an important political centre. King Dinis' wife, Queen Isabel, considered a saint by the people, died in Estremoz castle in 1336. Many later kings and queens lived in Estremoz, like Peter I, who died in the St Francis Convent of the town in 1367.

During the 1383–1385 Crisis, in which Portugal was almost conquered by neighbouring Castile, Nuno Álvares Pereira established his headquarters in Estremoz, and defeated the Castilian army nearby in the Battle of Atoleiros.

Estremoz was again militarily important in the 17th century, during the Portuguese Restoration War (1640-1668). Forces from Estremoz took part in the decisive Battles of Ameixial (1663) and Montes Claros (1665), once again against the Castilians.