The history of this town goes back to the Moorish invasion, as there is no proof of any settlement being in the area before that time. It is known that there were Roman troops and inhabitants in this valley, which is the Genal-Turon way that starts out at Gibraltar and goes right up inland plains around the city of Ronda.
The first documented settlers are those belonging to the Banu-I-Hawariyya, who gave the town its name. These first settlers established camp halfway up the hillside and set about building terraces that were irrigated by the natural water springs, which created a “linea de rigidez” below which gravity irrigation was the order of the day. This meant that it could not be increased. Above the terraces there were hardly any crops, although some wild plants did grow and quite a lot of shepherding went on.
After the Christian Reconquest, the Moors were allowed to stay around and they took up their positions as “mudejares” under the jurisdiction of the Condes de Feria, however, after several uprisings the Moors were finally expelled from the lands in 1570. From that moment on Benalauria is once again occupied by Christian forces and inhabitants from the Guadalquivir y Sierra Morena valleys. They were still subject to the Lordship of the Houses of Alcalá y de Medinaceli.
The population grew in the 18th century from 383 to 885 in the 1787 thanks to the favourable economic conditions that prevailed at the time that allowed the rapid growth in cereal crops and forestry industries, especially vineyards and olive plantations. It is at this time, too that the oil mills are built as well as the rebuilding of the church. At the same time the Town Hall, the Public granary and other important and beautiful buildings were edified to create a lovely urban unit that can be admired today. It was the outset of the 20th century that brought the greatest economic and agricultural growth to the area.
Something worthy of mention today is the fact that the whole town is dedicated to rediscovering its past and the fruits of such an arduous and enthusiastically completed task can be seen in the recently inaugurated Ethnographic Museum. The foundation to all the urban layout and development was the industrialised structure that Benalauria created around the four oil mills that were within the town. Two of them were in the mountains (one of these was dedicated to wheat) and the other was on the banks of the river Genal.
The current problems, as far as tourism is concerned, is in finding houses in the village that can be used for this end as there are often conflicts over the inheritances. Whatever, it should be said that the inhabitants are not looking to grow too much just in case the village loses the enchanting image it has today with its windy and narrow streets.
Nowadays the economy of Benalauria, apart from tourism, is based on local craftwork, especially wood sculptures although there are artisans who also work with stone, clay, and leather. The wood used in usually the cut-offs after the pruning of the local chestnut trees, so no damage is done to any of the local stock. This village is especially unique, together with Parauta, in that it is the only manufacturer of is exquisite sweet delicacy called, “marron glace”.