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There is vast archaeological evidence that places Budva among the oldest urban settlements of the Adriatic coast. Substantial documentary evidence provides historical references dating back to the 5th century BC.
A legend recounts that Budva was founded by Cadmus the Phoenician, a hero exiled out of Thebes, Greece, finding a shelter in this place for himself and his wife Harmonia. Two other civilizations also left innumerable traces: the Greek and the Roman.
Upon the fall of the Roman empire and its division into east and west, the defensive barrier which separated the two powers happened to run across this area, subsequently making a lasting impact on the history and culture of this town.

In the Middle Ages, Budva was reigned by a succession of Doclean kings, Serbian and Zetan aristocrats.
The Venetians ruled the town for nearly 400 years, from 1420 to 1797. Budva, called Budua in those centuries, was part of the Venetian Republic region of The Bay of Kotor (Boka Kotorska) and was fortified by powerful Venetian walls against Ottoman conquests.

In the very turbulent years that followed, Budva saw a change of several of its supreme rulers – Austria, France and Russia. A union of Boka Kotorska (and Budva) with Montenegro took place for a brief period (1813 – 1814), but from 1814 until 1918 Budva remained under Austrian Empire. After WWI, in 1918 Serbian army entered Budva abandoned by Austrian forces and it came under the Kingdom of Yugoslavia and was later annexed to the Kingdom of Italy in 1941.

During World War II many people of this area died in the fight against fascist invaders. Budva was finally liberated from Nazi rule on 22 November 1944 and, after belonging once again to Yugoslavia, is now part of the newly independent Montenegro.

A catastrophic earthquake struck Budva on 15 April 1979. Much of old town was devastated, but today there is little evidence of the catastrophe – almost all the buildings were restored to their original form.