The town was known as Arsinoe, after Arsinoe II of Egypt in antiquity, and mentioned by that name by Strabo, also as Ammochostos (meaning "hidden in sand") which is how it is today referred to in Greek. The same name developed into Famagusta,used in Western European languages and the Turkish name of Mağusa.

 Famagusta is one of the most important, greatly fortified ports on the shores of the Mediterranean. To the north of Famagusta lie the fabulous ruins of Salamis. This one great city is believed to have been founded in the 11th century BC and after the influences of the many conquering nations -notably the Romans- the city was finally abandoned in 648 AD following the combined catastrophes of earthquake and raids by Arab pirates, when the population moved to Famagusta.

Lusignan Palace FacadeAn influx of Christian refugees fleeing the downfall of Acre (1291) in Palestine transformed it from a tiny village into one of the richest cities in Christendom. In 1372 the port was seized by Genoa and in 1489 by Venice, and in 1571 it fell to the Turks. Under British administration (1878-1960) the modern section, called Varosha, was developed in large part as a tourist resort. After 1974, Varosha was sealed off to civilians and tourism ceased. Ferry service, begun in 1978 between Mersin, Turkey, and Latakia, Syria, includes Famagusta in its run.

After the British acquired Cyprus in 1878, they demolished many buildings to provide material for Port Said and the Suez Canal.

Famagusta was occupied by the Turkish military during the invasion of the island by Turkey in 1974, in response to the Greek-backed coup. The Greek Cypriot inhabitants fled. Consequently, most of the then-modern part of the city, known as Varosha (Turkish: Maraş), was deserted, becoming a closed-off military zone, something which persists to this day. Varosha is often described as a "Ghost Town" as it has been frozen in time with department stores still full of clothes, now many years out of fashion and hotels still fully equipped.

Turkish Cypriots continue to live north of Varosha, especially in the walled city. These sections of Famagusta remain vibrant with many fascinating buildings. The city is also home to the Eastern Mediterranean University.

The current Mayor-in-exile of Famagusta is Yannakis Skordis. Oktay Kaylap heads the Turkish-controlled municipal administration. There were suggestions from the Cypriot Government about Varosha to be given under UN administration, to return the refugees and the harbour to be use by both communities. Despite that would be very useful for the Economy of Cyprus, especially for Turkish Cypriots, however the Turkish Cypriot side and Turkey, rejected that suggestion, demanding the political benefit of the upgrading of the de facto Turkish Republic of Northern Cyprus.

The population of the city before 1974 was 39,000. From them, 26,500 were Greek Cypriots, 8,500 Turkish Cypriots and 4 000 from other ethnic groups. After the invasion, in 1975, the population was 8,500, all of them Turks. Today the population that lives in the town is 39,000. The number doesn't include the Greek Cypriot legal inhabitans but the Turkish Cypriots and settlers who live there.

The town also played host to the football clubs Anorthosis, which has many trophies in Cyprus, and Nea Salamina Famagusta. Both teams used until 1974 the stadium of the town, the GSE Stadium (Gymnastic Club Evagoras Stadium) but after the abandonment of the city the teams moved to the town of Larnaca. Both teams have also volleyball sections, which they are the best teams in Cyprus. Anorthosis has the most trophies in volleyball. Salamina also was until 2003 the concecutive champion of Cyprus for more than 5 years.