People have been living in this valley ever since ancient times, judging by the urns with burnt bones, tips of arrows and spears, various ornaments and other artifacts, found in the area of Batalski Stone. They are believed to have been used by the Thracians. Within the town have been discovered various Bulgarian Christian graves dated back to XII-XIV century, however further evidence suggest of the existence of a village from ancient time on the territory of modern day Chepelare that disappeared during the Middle Ages. There was a roman road built along the valley of the Chepelare River that went from Plovdiv to the Aegean

The first settler of Chepelare was Belyo-Kahaya, who built a house here in 1705. Other settlers from the neighboring villages followed and in 1726 they bought off the land and became owners of the valley and surrounding hills. That’s how Chepelare came to be. It was named after a neighboring village called Chepeli, which means stormy, cold. The main occupation was pastoralism and crafts. Some of the men occasionally went to the Aegean to work as master builders and fishermen. The people from Kardzhali often attacked the village, but were met with well-organized defenses.

In 1836 the people of Chepelare constructed the "St. Atanas " chapel and three defensive stone towers in only 40 days thanks to a detachment of soldiers sent by the Sultan to guard against the Bulgarian Mohammedans, who stood against the construction. A school was built later on and in 1867- a second temple- “St. Mary”.

 On the 18th of January 1878, the Caucasian Cossack brigade, led by General Cherevin, liberated Chepelare. The same year captain Petko voyvoda and his men stayed in town to protect the local Bulgarian Christian population from the Sinclair rebels.

After the Berlin Treaty, Chepelare was left as a border village and was a place where the men of Peyo Shishmanov voyvoda stayed in or passed by during the independence fights in the remaining parts of the homeland. After the unification in 1885, the southern border with Turkey was closed and the path of many sheep herds to their winter pastures, close to the Aegean, was cut off. The villagers were forced to slay many of their sheep and chop down vast area of the neighboring forest to make room for the remainder of the herd. Up to 30 000 acres of forest area was cut down during the period of 1879 and 1886 in the Chepelare region. This led to a new occupation - Logging and wood processing. The wood material was transported to Asenovgrad by river. In 1922 one of the first power plants in Bulgaria was built here. Slowly and continuously throughout the 30s and 40s of the XX century, Chepelare started turning into a tourist resort town.