Some Stone Age objects have been found around the mouth of the Utsjoki river, but a permanent settlement in the area of the municipality was not established until the 16th century . In 1695, only 23 Sámi families from Utsjoki and 4 from Teno lived in the vast fell areas, on the banks of Tenojoki and Utsjoki, and on the shores of the lakes . Population growth was slow for a long time even after this. In 1750, the combined population of Utsjoki and Inari was 541, and at the beginning of the 19th century it was only 857. In 1850, Utsjoki’s own population was 423, and at the beginning of the 20th century, 488. As of 2023, the population of the Utsjoki municipality (eg Karigasniemi, Nuorgam and Utsjoki village) is 1181.
Reindeer herding and fishing provided a living for only a part of Utsjoki’s inhabitants for a long time. During the summer, fishing in the Arctic Ocean became an important way of life. Connections to Finnmark, Norway also formed trade connections, and through marriages the blood of the Sami people of Finnmark and Utsjoki has been mixed for hundreds of years. Migration from Utsjoki to Finnmark also increased in the first half of the 19th century. The relations between the Sámi people of Utsjoki and the Finns who moved there from the south started to change only in the 20th century. While there were only three Finns in Utsjoki in 1800, there were 13 a hundred years later and almost 300 in 1950. Today it is roughly 50% Sami and 50% Finnish. The total population of Utsjoki municipality in 1950 was 980 and in 1960 already 1,209. Despite the increase in the Finnish population, the Sámi community has remained vibrant; in 1962, 965 Sámi lived in Utsjoki.
Along with the change in the population structure, there was a change in the economic structure in Utsjoki. After the Second World War, agriculture and cattle farming came alongside reindeer husbandry and fishing . As road connections improved and tourism became more active, the share of services increased strongly.
Administratively, Utsjoki belonged to Tornio Lapland from the 16th century. It was joined in 1602 by the order of King Karle IX under the Tornio chaplaincy. Utsjoki became an independent parish in 1747, and at the same time Inari, which was previously part of the Kemi Lapland parish.
On September 21, 1751, the Strömstad Treaty between Norway (Denmark) and Sweden (including Finland) was signed. Norway was as that time a part of Denmark and Finland was at that time a part of Sweden.
Utsjoki was definitively annexed to Finland under the Peace of Strömstad in 1751, and Finland’s current northern border against Norway was confirmed in the 1764–1766 border patrol. In 1826, the last common areas between Varangerfjord, Inari and Utsjoki were divided between Sweden, Norway and Russia.
The decision to establish the first national school in Utsjoki was made in 1878, but the school did not start operating until 1885.
The main road up to Utsjoki was completed in the 1960s. Before that, the mail used to come by bicycle from Kaamanen, 100km to the south. It was a 3 day trip and the postmen used to put their bicycles and the mail in rowing boats to cross many of the lakes, as it was easier that way than traversing the hilly and rocky trail. Especially on single gear bikes with 12.5kg of mail onboard. There were a few huts constructed a long the way for the postmen to overnight at or escape bad weather. A few of those huts still exist and can be seen at the side of the road on the drive up to Utsjoki.
During the war in Lapland, the German army used scorched earth policy and set fire to many towns in Lapland. Even the remote town of Utsjoki was not spared and most of the town was destroyed. They spared only the church and its outbuildings. The last German soldiers left Karigasniemi, the northernmost part of Finland, on November 18, 1944.