The name Sephardic comes from a reference in the Bible (Obadiah 1:20) to the Sepharad region, which was early identified as the Iberian Peninsula. Jews settled in the peninsula as early as the first millennium B.C.E. Their culture flourished from 900-1050 during a period of Moorish rule in southern Spain, under which they were allowed equal rights as citizens. Many cities in Spain were founded and named by Jews, the most notable being Toledo (Hebrew "Toldoth," which means "generation").

In the closing years of the Moorish-Spanish conflict, religion increasingly became an issue as the Catholic clergy gained in power and formed the Inquisition. Faced with increasing persecution, many Jews fled to Portugal and other Mediterranean cities. In 1492 the Christians succeeded in driving out the Moors, and the Inquisition issued an edict of expulsion against both Moslems and Jews. Five years later Portugal issued the same edict. The Jews who migrated to Europe were linguistically assimilated but those who migrated to North Africa and the Eastern Mediterranean were able to maintain their Hispanic culture. This was due largely to their acceptance as full citizens by the Ottoman Empire.

The Jewish community in Sarajevo dates to as early as 1565. Most Jews came to Sarajevo via Italy, Greece, and Bulgaria. The community flourished and maintained its Spanish heritage, developing a written language that used an alphabet based on Hebrew and Arabic. The Jewish community was devastated during World War II, in part by deportation to camps and in part by local massacres. After the war some survivors returned and reestablished the community; however, it is now centered on an Ashkenazi (Yiddish-speaking) synagogue. 

Most Sephardic songs are in Ladino, which is an old form of Spanish that was maintained as a secular language by Spanish-speaking Jews (known as the Sephardim) in the Diaspora. It has incorporated words from various other languages, including Hebrew, Arabic, Italian, Turkish, Greek, and Slavic, and has also retained archaic Spanish words. The pronunciation and spelling differ from modern Spanish, and also differ from country to country.