Kapangan was formerly called Takdang (or Tacdang), which means "people from the east". The early natives, who came from eastern settlements such as Tinec in Buguias and Bontoc, settled along the Amburayan River and lived by the kaingin system. They traveled to Naguilian in La Union to trade goods with the Ilocano people The appointed first town president (before now mayor) is Espiritu Cariño (1898-1900) .
During the Spanish Regime, Kapangan was organized into four barrios; Balacbac, Paykek, Pongayan, and Taba-ao. The Spaniards appointed Espiritu Cariño as the first Capitan del Barrio, whose duty was overseeing tax collection from local land owners. They also appointed Juan Ora-a Cariño to the position, eventually promoting him to Commandantes, one of the highest ranks in office during the time. Both Espiritu Cariño and Juan Ora-a Cariño appointed eight people in eight different barrios to serve as barrio capitans, whose tasks were to oversee the construction of Spanish trails throughout the mountain region.
Under the American Civil Government, Kapangan was established as one of the 19 townships of the province of Benguet, upon the issuance of Act No. 48 on November 22, 1900
On August 13, 1908, Benguet was established as a sub-province of the newly created Mountain Province with the enactment of Act No. 1876. Six townships of Benguet were later abolished, one of which was Balakbak, which was integrated into the township of Kapangan.
On June 25, 1963, then-President Diosdado Macapagal issued Executive Order No. 42 converting eight (8) of the thirteen (13) towns (designated as municipal districts) of Benguet sub-province into regular municipalities. Kapangan was among them.