Allacapan began as a village in the middle of a jungle. Its early inhabitants were the Negritoes. According to an unknown missionary, a former Municipal President of Aparri Francisco Umengan, came to the area in early 1941 to open a forest concession near the Negrito Village. After a few years, his lumber business prospered. This development had attracted other Cagayanos from surrounding municipalities to move to the area to seek better source of living. Most of them found work in his timber yards, while those who befriended the landholding Negritoes were given homesteads, which they planted with a wide variety of crops.
The name “Allacapan” was derived from the word “Alla-appan”, an Ilocano term which means a ‘trap’. Former Aparri Municipal President, Francisco Umengan, was annoyed by the sharp noises created by the rustling of the dried leaves in the vicinity so he asked his Negrito guide about these and he was told “Alla-appan”. Umengan then named the place “Allacapan”.
Negritoes, also known as Aetas, were the first known inhabitants of Allacapan and the place has its beginnings as a small village in the vast forest. Later, Ilocanos mainly from Ilocos Sur, discovered it in quest for better land and eventually dominated the area, among them future town mayor Santos Martinez.
In 1926, Allacapan was founded as a Municipal District of Tawit, Mountain Province and became an independent Municipal District by virtue of Executive Order No. 68 issued by Eugene A. Gilmore, the Gobernador General Interbio last June 20, 1927 which took effect last July 1, 1927. Finally, it became a regular municipality of the Province of Cagayan in 1945 by virtue of Commonwealth Act No. 692 allegedly authored by Congressman Miguel Pio.