The town is situated in a region known as the lands of "Basto", its name being linked to the legendary Lusitanian warrior, "Basto", who fought so bravely against the Moorish invaders and was later depicted in a series of granite statues. Such statues were made from what were originally warriors´ tombstones dating back to the period before the Roman occupation (first century BC) and one of them has been placed on a pedestal at the entrance to Cabeceiras de Basto.
The region's development was greatly influenced by the monastery of São Miguel de Refojos, which was founded some time before the twelfth century, and the town was also once known as Refojos do Basto.
The surrounding countryside is extremely beautiful, with clear streams and luxuriant green hills. Particularly impressive is the Parque de Moinhos do Rei, which includes the communal windmills of Abadim, commissioned in the fourteenth century by D. Dinis, the king of Portugal.