The 12th-century building might have been constructed on the remains of an earlier Iron Age fort. The Lords of the Isles used the fortress as a principal court and meeting place of their clan chiefs. Iain Mor MacDonald, 3rd of Dunnyveg and his son Iain Cathanach MacDonald were taken prisoner at Finlaggan Castle, through the deception of Macian of Ardnamurchan for the hanging and execution of the governor of Dunaverty Castle and were later tried and hung on the Burgh Muir, Edinburgh. In 1541 Finlaggan was held from the Crown by Donald MacGilleasbuig. The castle appears to have been demolished in the 15th-16th century.