Fred Stedman — an early pioneer and miller — kept a herd of goats on the island. Upon returning to the island after the terrible winter of 1780, Stedman found all but one of the goats had died; thus giving the island its name.

The preservation of the island as parkland is due to the early efforts of Augustus Porter, who in the middle 19th century recognized the long-term value of the falls as a tourist attraction. Porter purchased the island and later allowed a group of Tuscarora Native Americans to live on the island and sell their crafts to the tourists who came to the falls by stagecoach and early railroads. In spite of pressure, Porter refused to tame the environment on the island. In 1817, he built a toll bridge to the island for tourists. It was swept away by ice, so another was built the following year downstream. Basil Hall called it "one of the most singular pieces of engineering in the world". Almost seven hundred feet long, it soon became the best-travelled walkway in the region.

In 1885 the island was included in the Niagara Reservation State Park which is the oldest state park in the U.S.