It was founded as Arsinoe by the Macedonian Egyptian king Ptolemy II (308–246 BC). An 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.

The Turkish armada arrived outside the town in 1570 and put it under siege for a year. In 1571 not only Famagusta, but also all Cyprus was under Turkish rule and remained so until 1878. The end of colonial rule in 1960 led to the intensification of intercommoned strife between Greek Cypriots and Turkish Cypriots that concluded in 1974 with Turkish Cypriot rule in North Cyprus.

At some point in history the cave-shrine was expanded into a church. As we can see from the original door, from the stone entrance frame and from the circular design (rosette) found over the door, the church must have been built during the 14th century. The stone-built extension of the church consists of two sections both covered with a pointed arch. The smaller of these sections seems to have been used as a Latin chapel during the 16th century. On the north wall of this section there still survives a wall-painting depicting three female saints, with very clear Italian influence in its technique, dated from around the 15th century.

The main entrance to the monastery used to be the south gate. The construction of this wing seems to have been done with great diligence but it is rather simple and without any ornamentation. It must come from an earlier period. By contrast, the two-storey building next to the north gate leading to the village square is decorated, betraying a clear influence of Venetian architecture, and must come from the 16th century. The octagonal fountain in the middle of the yard is also of the same architecture and comes from the same period.

The oldest section of the monastery is the northeastern one and consists of the four cells whose ceilings are cross-like. These cells are equipped with private toilets with from the outside look like buttresses. At the base of the wall, under the toilets, there used to be a conduit into which water from the aqueduct was occasionally released in order to remove the filth and clean the toilets. The two southern cells of the east wing, as also those of the north wing, were built at a later time, but certainly before the two-story structure found by the north gate. During the Ottoman occupation (1571-1887) an olive-mill was installed in the eastern cell of the north wing, which can still be seen there today.

According to local tradition, during the Venetian occupation, circa 1500 A.D., a wealthy young woman from a distinguished Venetian family of Famagusta came to the monastery of Agia Napa in order to flee the pressure of her family to marry a nobleman. Soon after, this wealthy woman began renovating the old buildings and erecting new ones. She is possibly the one responsible for both the two-storey building and the octagonal fountain. It is said that she is also the one who planted the old huge sycamore tree found outside the south gate of the monastery. This Venetian woman must have spent the rest of her life here, for according to the tradition, the sarcophagus found in the monastery yard next to the octagonal fountain belongs to her.

The monastery of Agia Napa flourished during the 16th century and continued to hold a position of importance up until the end of the Venetian occupation of Cyprus in 1581 A.D. Agia Napa is frequently referred to in manuscripts of this period and appears on numerous maps of Cyprus from this era. One of the forts of the south wall of the old city of Famagusta, built by the Venetian conquerors, was named Agia Napa, possibly because the road leading to Agia Napa began there.

During the Turkish (Ottoman) occupation, and shortly before 1668 A.D., the monastery of Agia Napa was still a convent. Soon after, however, it was converted to a men's monastery and continued to flourish as such for almost a hundred years until 1758 when, for reasons unknown, it ceased to be occupied by permanent monks. After this, it began to operate again in 1800 A.D. with three monks whose superior was someone by the name of "Ioannikios".

During the years of its prosperity, the monastery acquired large stretches of land and established Metochia (monastic embassies) in several places. One of these was in the village of Ormideia and another one in Prasteio. The monasteries of St. George of Hortakia, found west of the village of Sotera, and that of St. Nikandros, both came under the auspices of the monastery of Agia Napa.

According to an inscription found on the wall of the northeastern wing of the monastery, in 1813 the auxiliary bishop of Trimithus Spiridon, assistant bishop to the Archbishop Kyprianos (who was beheaded by the Turks in 1821), renovate the monastery of Agia Napa once more. The name of this bishop is also found on two small silver icons copies of the ancient large icon of the Virgin Mary, dated 1803, where he is described as the abbot of the monastery.

The area around the monastery of Agia Napa was not inhabited until 1790 when (according to local tradition) there arrived from Thessaloniki a group of people who left their homeland fleeing an outbreak of cholera (the plaque). Finally, only two of them survived the deadly disease, a man by the name of Nicholaos Kemitzis and his son. Later the son married a Cypriot girl from a small village called Panayia, which was found, on the hills north of the monastery where the water of Agia Napa comes from. The young couple did not settle in Panayia because of a bitter conflict between the inhabitants of Panayia and Turkish authorities of Famagusta concerning the supply of water. Instead, they sought to establish a safer home outside the monastery thus beginning the village, which was to also be named "Agia Napa" after the shrine.

After the village grew in numbers, and since the monastery was no longer active, some of its rooms began to be used for the various needs of the community and especially as classrooms for the children of the elementary school. The church of the monastery became the parish church and continued to be so until recently when the new church was finished. The old shrine-church is still used, however, for weekday services and baptisms.

The new church, built Southwest of the monastery, was completed in 1990. Its interior walls are covered with beautiful Byzantine-style icons, which were painted in three stages by the iconographer Sozos Yiannoudies and his crew and were completed in August of 1994. The new church is also dedicated to the Virgin Mary and celebrates, along with the monastery, the feast of the Birth of the Mother of God (the Theotokos) on September 8.

The parish and monastery of Ayia Napa keep five small chapel in the area. These are, St. Barbara, St. George, St. Epiphanios, St. Mavra and St. Paraskevi, where services are held only on the feast of their patron saint.