Aibonito is located on a relative high elevation (its main plaza is the highest in the island at 2,401 ft above sea level), which makes its climate cooler than most of Puerto Rico's towns. It holds the record for the lowest temperature ever recorded in Puerto Rico; because of this, the municipality's nicknames include "The Cold City" and "The Fridge of Puerto Rico."
After the Spanish arrived, it is believed that a ranch was established in the region by Pedro Zorascoechea in 1630, which led the development of a hamlet. However, it wasn't until 1822 when Don Manuel Veléz presented himself before the government, representing the inhabitants of the area, to ask for Aibonito to be officially declared a town. This was authorized on March 13, 1824, by Governor Don Miguel de la Torre. The first Catholic church in Aibonito was built in 1825. The building was replaced by the current church, which was started in 1887 and completed in 1897. After the town was officially constituted, wards started developing in the area.
On the Spanish–American War of 1898, around 800 Spanish and Puerto Rican soldiers were able to defeat the invading American troops due to their strategic placement in the Asomante mountain. This scrimmage came to an end when the Spanish government surrendered on August 12, 1898. It is interesting to note that the Spanish and Puerto Rican forces at Asomante never surrendered and would have held their position indefinitely if not for the buckling of the Spanish government in Madrid.
There are several stories regarding the name of the town. Some people say that it is derived from the Taíno word "Jatibonicu", which was the name of a Cacique (leader) of the area. This name was also used to refer to a river in the area and was also the name used by the tribe of Orocobix, Taíno chief of the area. Finally, there's a legend that tells of a Spanish soldier called Diego Alvarez who on May 17, 1615, reached one of the highest peaks in the area and upon watching the view, exclaimed "Ay, que bonito!" ("Oh, how pretty!") which eventually was turned into the name of the region.