The presence of old relics at different sites in the village Council indicates that the area had remained under the influence of Buddhism and Hindu Shahi Dynasty. However, very little research work exists on the subject. The history of the village revolves around the great towering spiritual personality ‘Mian Noor Baba’, the grandson of Akhund Dervaiza Baba in 17th century. The land of the village was inherited to him and distributed among his descendants. His shrine is located in the village and the people visit it to show their spiritual attachment with him.  His luggage and belongings exist with individual families in disorganize manner. Islampur has remained of significant importance in the Swat State era, as many of the people remained in State service on good position at that time. Proximity with capital city Saidu Sharif was also one of the reasons to have influence in the State affairs.

One of the most important events which has significant and long lasting effect on the demography and social & economic outlook of the village was the moving and settling of the weaver’s community into the village in the thirties of the 20th century. The indigenous weaving art held its root and transformed into cottage industry since then. This has caused the transformation of society from agrarian society to industrial society with the passage of time. Islampur has now become the icon for the handmade woolen products and cottage industries throughout Pakistan and abroad as well.