The town’s name is derived from the Cebuano term “mahayag” (ma = to become + hayag = bright) which means to become bright or sunny. When the Visayan migrants first trickled into the area after World War II, the place was heavily forested, which, to some looks dark and forbidding. Local historical sources had it that when a large “Dao” tree which stands in the townsite was felt, the place becomes bright, hence the expression “mahayag“.
Mahayag used to be sitio of barangay Molave of the municipality of Aurora. Early settlers of the area had endeavored for the creation of another municipality to fast-track development which is possible only by having a distinct political subdivision from the municipality of Molave. The town site for the new municipality was donated by Zacarias dela Torre and Pedro Alquizar.
The municipality of Mahayag was officially created on March 9, 1960, pursuant to Executive Order No. 393 by President Carlos P. Garcia, with Saturnino Mendoza as its first appointed and subsequently elected Municipal Mayor. It was formed by the separation of 20 barrios from the municipality of Molave and 3 barrios from the municipality of Dumingag.