In 1488, the Portuguese explorer Bartolomeu Dias sailed into these waters and planted a wooden cross on a small island he called Santa Cruz. The moment was pivotal. Dias had proven that the maritime route around Africa to Asia was navigable, a discovery that would make Portugal the world's first global maritime superpower. The mountain ranges surrounding the bay became a navigational landmark for ships rounding the treacherous Agulhas Bank, and the bay itself, 683 kilometers east of the Cape of Good Hope, earned a reputation as a reliable landing place for fresh water. The Khoikhoi peoples who had inhabited this coastline for millennia watched as European sails appeared with increasing frequency, each arrival bringing the trading networks and colonial ambitions that would transform the region. The bay Dias named would later receive the 1820 British settlers and become the site of Gqeberha (Port Elizabeth), one of South Africa's major port cities.

Algoa Bay contains six named islands in two groups of three, and according to BirdLife International, they are the only islands along a 1,777-kilometer stretch of coastline between Cape Agulhas and Inhaca Island in Mozambique. Their combined surface area is just 40 hectares, but their ecological importance is immense. The St Croix group sits close to shore near the Port of Ngqura: St Croix Island itself, Brenton Island, and Jahleel Island. Forty kilometers east, the Bird Island group comprises Bird, Seal, and Stag Islands. All six are declared nature reserves within the Addo Elephant National Park and are closed to the public. In 1755, the East Indiaman Doddington wrecked on the Bird Island group while sailing from Dover to India. Most aboard perished, but survivors were marooned for seven months, subsisting on fish, birds, and eggs until a carpenter among them built a boat. They named the island as they sailed away from it.

St Croix Island hosts 43 percent of the global population of the African penguin, a species whose numbers have been declining sharply across its range. The population on St Croix peaked at 63,000 birds in 1993 and has since fallen dramatically, mirroring a species-wide crisis driven by competition with commercial fisheries, oil pollution, and habitat disturbance. Bird Island is one of only six breeding sites in the world for the Cape gannet, and the islands collectively support 14 species of seabirds, including the roseate tern, which breeds regularly here and nowhere else off southern mainland Africa. Humpback whales, southern right whales, bottlenose dolphins, and great white sharks share the bay. Conservation groups have recommended 25-kilometer marine reserves around the breeding islands, but the development of the Port of Ngqura deep-water facility and associated heavy industry complex near the St Croix group poses ongoing threats. A 2019 oil spill at the port directly impacted the penguins, and environmental groups have raised alarm about ship-to-ship fuel transfers in the bay.

The bay's navigational hazards have shaped its history as much as its wildlife has. Thunderbolt Reef, about one kilometer southwest of Cape Recife at the bay's western edge, sits submerged except during spring low tides, its presence betrayed only by the surf crashing over it. The reef has claimed ships for centuries, a trap for vessels carelessly entering or leaving the bay. Despatch Rock, 2.4 kilometers east of the suburb of Summerstrand, lurks just below the surface at high tide and is marked with a warning light. These physical dangers complement the chemical ones on the seafloor. Algoa Bay is a place where beauty and hazard exist in intimate proximity, where penguin colonies breed within sight of industrial port cranes, and where the deep water that once drew Dias to these shores now carries oil tankers past the breeding grounds of species that can ill afford another spill.