Until 2002, the Isles of Scilly had five separate schools - a secondary school and a primary in Hugh Town on St Mary's, and three small primaries on Tresco, St Agnes, and St Martin's. The off-island primaries were praised by inspectors for what they did with very little. The two larger St Mary's schools, however, were judged inadequate. Rather than close them, the British government applied a relatively new policy called Fresh Start and forced a merger. In April 2002 the five schools became one federated entity - the first such federation in the country. The off-island primaries were drawn in as well. There was now, in effect, one school with five campuses scattered across an archipelago. An inspection in June and July 2003 again found standards inadequate at the St Mary's sites, and the school was placed in special measures until 2005. But under a succession of head teachers the federation began to find its feet, and by 2007 Ofsted judged the whole organisation 'outstanding'.

In 2008, the school was awarded £13 million in government funding to build a new combined 3-to-16 school complex on a site next to the existing Carn Gwaval primary school, between Hugh Town and Old Town on St Mary's. Construction ran through 2010 and 2011, and the new complex opened for the 2011-12 school year. The secondary school moved permanently away from its old Carn Thomas site on the eastern edge of Hugh Town, and the Carn Gwaval primary pupils moved into the new complex next door. The old primary building was modernised and turned into the island's main indoor sports and fitness centre. The old secondary school at Carn Thomas was demolished in the winter of 2016-17. For a community of barely 2,000 permanent residents on St Mary's, the new school is a remarkable piece of infrastructure - a £13 million bet that even the smallest community in England deserves a serious campus.

The school's recent history has not been calm. In May 2012, the then head teacher Bryce Wilby was suspended over allegations of financial irregularities, allegations he strongly denied. The case stretched on for years. In autumn 2012 Ofsted downgraded the school's status to 'requires improvement', citing weak leadership and management. In 2015 the case against Wilby for improper conduct was thrown out; an independent forensic auditor concluded that the evidence offered by the Council's own auditors was fabricated, and the NCTL panel that hears teacher-misconduct evidence found the council's evidence 'wholly unreliable'. Wilby's wife stated that they intended to take legal action against the Council of the Isles of Scilly. In 2016 the secondary school was placed back into special measures, prompting urgent questions about which academy trust would be willing to take on a school whose geographic isolation makes every staff recruitment, every supply chain, every part of normal school operation more difficult. A sponsor was found. In January 2019 the school converted to academy status, became The Five Islands Academy, and was placed under the Leading Edge Academies Partnership. In July 2021 the Duke and Duchess of Cornwall - in their capacity as the Duchy of Cornwall, which owns most of the Scillonian land - visited the school on a tour of the South West.

The four primary bases continue to operate close to where the children live: Carn Gwaval on St Mary's; a shared school on Tresco near Old Grimsby that serves both Tresco and neighbouring Bryher; St Martin's; and St Agnes. The St Agnes site has had as few as seven students. St Martin's has had as few as six. These are tiny class sizes by any English measure, well below national averages, and they require teachers who are happy to mix age groups, share specialisations, and live on islands where the bakery, the pub, and the school staffroom may all share the same handful of regulars. Secondary education (up to GCSE) is provided only on St Mary's, at the Carn Gwaval campus. Children from Tresco, Bryher, St Martin's, and St Agnes who reach secondary age can either commute on the school boat every day from the nearer islands or, more often, board at Mundesley Boarding House from year seven onwards. The original Mundesley house and its extension together provide a dining room, kitchen, living room, house parents' flat, boys' hostel on the ground floor, girls' hostel on the first floor, and a clinic. Students return home by boat every weekend. It is one of the smallest and most unusual school communities in the United Kingdom - one campus, five islands, a boarding house, and a fleet of inter-island ferries doing the work that a school bus does almost everywhere else.