Kaigutsi was mentioned in written records under the name Kaickotz as early as 1591. At that time, both Kaigutsi and Selja village belonged to the Käina Church Manor. In the 18th century, one of the first reading schools of the area was founded in Kaigutsi. The village, with its approximately 20 farmsteads, was home to many children. Before the building of Rebasselja village school was completed in 1865, the schooling of children took place in Kiisa Hansu farm in Kaigutsi for a while. In 1860, there were 12 post mills turning their sails in the village, of which three have survived until this day: the Peetri mill, the Miku mill, and the Mäevälja mill. However, after World War II, village life changed drastically: in April 1949, the Kaigutsi collective farm was formed of the former private farms. 45 households with their 139 inhabitants joined the collective farm. Soon, the merging of small collective farms started; and the new collective farm – “Ühendus” (‘Union’) – became one of the major employers of the region for many years. However, as has been the case with everything else throughout history, the time of collective farms came to an end one day. On 24th February 2004, the Kaigutsi Village Society was founded; and the village elder was elected. Today, the joint activities are greatly facilitated by the village square, which the villagers built together. In 1970, there were 100 people living in the village; in 2019, there were 50.
A number of well-known people are originally from Kaigutsi, including comedian Miku Kaarel aka Kaarel Tischler-Ulpus (1862–1938), teacher and actor Paul Maivel (1907–1976), dance instructor and folk musician Daimi Tulp (1932–1996), artisan Õie Tammest (1931–2013), accordion player August Tammest (1923–2004), motorcycle racer Endel Kiisa (born in 1937), honored fisherman Elmar Aksli (born in 1933), and many others. Writer Esta Aksli (1935–2013) also lived in Kaigutsi for several years.
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