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Spanish galleons first visited Estero San Jose at the mouth of the Rio San Jose to obtain fresh water near the end of their lengthy voyages from the Philippines to Acapulco in the late 17th and early 18th centuries. As pirate raids along the coast between Cabo San Lucas and La Paz became a problem, the need for a permanent Spanish settlement at the tip of the cape became increasingly urgent. The growing unrest among the Guaycura and Pericu Indians south of Loreto also threatened to engulf mission communities to the north. As a result, the Spanish were forced to send armed troops to the Cape region to quell the Indian uprisings in 1723, 1725 and 1729.

In 1730, Jesuit Padre Nicholas Tamaral traveled south from Mission La Purisima and founded Mission San Jose del Cabo on a mesa overlooking the Rio San Jose some 5 km. north of the current town site. Due to the overwhelming presence of mosquitoes at this site, Tamaral soon moved the mission to the mouth of the estuary on a rise flanked by Cerro del Vigia and Cerro de la Cruz.Tamaral and the Pericus got along fine until he pronounced an injunction against Polygamy, a long tradition in Pericu society. After Tamaral punished a Pericu Shaman for violating the anti-polygamy decree, the Indians rebelled and burned both the San Jose and Santiago missions in October of 1734. Tamaral was killed in the attack. Shortly thereafter the Spanish established a presidio, which served the dual purpose of protecting the community from insurgent Indians and the estuary from English pirates.

By 1767, virtually all the Indians in the area had died either of European diseases or in skirmishes with the Spanish. Surviving mission Indians were moved to missions farther north, but San Jose del Cabo remained an important Spanish military outpost until the mid-19th century when the presidio was turned over to Mexican nationals.

During the Mexican American War (1846-48), marines from the U.S. frigate Portsmouth briefly occupied the city. A bloody siege ensued and the Mexicans prevailed under the leadership of Mexican Naval officer Jose Antonio Mijares. Plaza Mijares, San Jose's town Plaza is named to commemorate his victory. As mining in the Cape Region gave out during the late 19th and early 20th centuries, San Jose del Cabo lost population along with the rest of the region. A few farmers and began trickling into the San Jose area in the 30s and in 1940 the church was rebuilt.

San Jose del Cabo remained largely a backwater until the Cape began attracting sportfishers and later the sun-and-sand-set in the '60s and '70s. Since the late 1970s, FONATUR (Foundation Nacional de Fomento del Turismo or National Foundation for Tourism Development) has sponsored several tourist development projects along San Jose's shoreline. Fortunately, the developments have done little to change San Jose's Spanish colonial character. Local residents take pride in restoring the towns 18th century architecture and preserving its quiet, laid back ambiance.

In November of 1993, a severe storm wreaked havoc on beachside condos near San Jose del Cabo but the town itself suffered little damage. Today, San Jose del Cabo provides a welcome respite from the busy, fiesta atmosphere found twenty miles south in Cabo San Lucas.