The origin of the name Arbatax is uncertain; according to tradition it derived from the Arabic for "14th Tower" and refers, probably, to the nearby watchtower built by the Spaniards to protect the territory from the incursion of Arab pirates.

The founders of Arbatax were Campanian fishermen from the island of Ponza, located in Lazio, close to the coast of the Italian Peninsula.

The location assumed importance in the 1960s after the construction of the main Sardinian paper mill.

The port is used by ferries to and from Civitavecchia and Olbia and is also monopolized by the marine construction company Intermare, which builds gas rigs and vessels. The marina is one of the cheapest in Sardinia.

The town is connected to Lanusei and Cagliari by a narrow gauge railway, today used for touristic purposes, owned by Ferrovie della Sardegna.

The closest airport is the Tortolì Airport, about 4 km from the town.