The late Holocene evolution of the former coastal lagoon of Vilamoura was reconstructed according to sediment cores and geophysical profiles. According to sedimentological analyses of the cores, five palaeoenvironmental stages were defined. (1) The pretransgression stage is represented by an erosive surface formed during incision of the river into the basement because of a lower sea level. This palaeosurface was retraced by refraction seismic profiles, showing that the marine transgression took place on a wide plain with several incised channels. (2) The development of an estuary started by transgression into the river valley corresponding to the postglacial sea level rise. Radiocarbon dating indicates a sea level not lower than −4 m at a minimum age of 4716 ± 72 Cal BP. After the transgressive maximum, infilling of the estuary started, beginning with (3) subtidal infilling related to the formation of a sandy barrier followed by (4) supratidal infilling with further accretion of the barrier, changing the previous open bay into a coastal lagoon. (5) Finally, the lagoon was fluvially filled with terrestrial sediments, changing the marine to a fluvial milieu with floodplain deposition. Analysis of benthic foraminiferal and ostracod assemblages revealed additional information about the environmental conditions during evolution of the estuary, which led to a further subdivision of the marine facies into stages with mainly estuarine, lagoonal, or marine influence. The end of the marine stage was dated at 2895 ± 48 Cal BP, indicating a pre-Roman onset of human-induced soil erosion.