Yiwu has been an inhabited city since the Neolithic Age when there were human settlements here. However, it was not until the 25 year of Emperor Ying Zheng's rein during the Qin Dynasty that the city of Yiwu was officially founded in 222 AD, when it was called Wushang County.

It was given the name Wushang to honor the memory of a good son who lived in the area before the city was founded. The legend goes that during the Qin Dynasty, greedy land owners around the area deprived the tenant farmers of a decent living. A young man named Yan Wu and his father were forced to live in a cave, where thousands of mosquitoes would bite them every night. In order to spare his father the insect bites, Yan Wu would sleep without his shirt to lure the mosquitoes toward him and away from the old man. A huge flock of crows living nearby were moved by his sacrifice and would fly to the cave every night, eating the mosquitoes to save the son as well as the father from their bites. The father soon died, and when the crows came to mourn him they decided to build him a tomb from earth which they carried in their beaks across many miles. By the end of their endeavors, all the crow's beaks were broken and bleeding. The city was named Wu (crow) Shang (injured) in recognition of these honorable birds.

During the Tang Dynasty, the name of the city was changed to Yiwu which means Righteous Crow. Many illustrious citizens of China have lived and worked in Yiwu, chief amongst these being Luo Binwang, a poet from the Tang Dynasty, whose work is taught to all schoolchildren to this day. He is honored in the city with a park and several statues. Zong Ze also lived here. He was a famous general during the Northern Song Dynasty. Chen Wangdao the journalist and translator, Feng Xuefeng, the modern poet who advocated the importance of human emotion in literary works and Wu Han a famous PRC party official have all come from Yiwu in modern years to make their mark on both China and the world.

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