"Aiea" was originally the name of an , or Hawaiian land division. The name was derived from a species of plant in the nightshade family, Nothocestrum latifolium. It stretched from Aiea Bay (part of Pearl Harbor) into the mountains to the north. At the end of the 19th century, a sugarcane plantation was opened in the district by the Honolulu Plantation Company.
In July 1941, five months before the attack on Pearl Harbor, Commander Thomas C Latimore from the , vanished while walking in the hills above Aiea. Despite several major searches and a naval investigation, his disappearance has never been explained. Within the U.S. Navy, many believed he might have been abducted and killed by a local Hawaiian because he had either stumbled upon their activities in the hills or had been specifically targeted because of his background in Naval Intelligence.
On December 7, 1941, a large part of the Japanese attack focused on the military installations around the town and the ships moored off shore. For example, one damaged ship, the , beached in Aiea Bay to prevent sinking. Many people photographed the attack from the hills in Aiea.
After World War II the plantation shut down and the mill was converted into a sugar refinery. Meanwhile, developers started extending the town into the surrounding former sugarcane fields. In the years since then, Aiea has grown into an important suburb of Honolulu. The town's sugar history came to a close in 1996, when C&H Sugar closed the refinery. Then in 1998, the 99-year old sugar mill was torn down by the owners, amid protests from town residents and the County government.
Singer and actress Bette Midler was raised in Aiea.