Near the end of the 18th century, Karagwe's prosperity became well known and traders came to barter salt, pepper, oranges, copper, and millet for local goods. Around 1800, beans and cooking bananas were introduced from Uganda. Early in the 1840s, Arabs arrived and trade flourished, especially the slave trade. The cowrie was introduced as hard currency and many new crops were introduced (e.g. sweet banana, tomatoes, maize, cassava, pawpaw, vegetables and citrus fruits).

Throughout the 1890s, Karagwe was ravaged by local wars, epidemics, and pests. The outbreak of rinderpest and smallpox reduced human and livestock population. Tribal wars were eventually settled by the German authorities in Bukoba). Around 1900, commercial coffee growing was introducted by the Germany, which was further developed under British rule. Coffee production was mainly sold in Great Britain. In 1935, coffee processing industries in Bukoba were established by the Indians. During and after the 2nd World War, the first farmer associations were established and many farmers migrated from Bukoba to Karagwe. During the late 1990s, 165,000 refugees from Rwanda were divided over 5 camps in the Karagwe District.