The early settlement of Água Retorta, which had its origin with the settlement of Faial da Terra, occurred with the reestablishment of colonists from old Povoação. Água Retorta became important due to the abundance of farms that existed in this territory. The place name, as Gaspar Frutuoso wrote, was inspired by a ravine ""that twisted and turned"", that by the 16th century developed into a land of many farms. His description in "Saudades da Terra": "From here progresses the lands of Nordeste, all in land of high cliffs, where two lengths below is the beach, called Água Retorta, because water twists and turns". Paraphrasing Gaspar Frutuoso, Urbano de Mendonça Dias affirmed that the name was derived from the twists the ravine made, as it descended to rocks in the sea.