Stephens Island, called Ugar in the local Meriam language, lies in the eastern group of the Torres Strait Islands archipelago of Queensland, Australia. The island is within the locality of Ugar Island within the local government area of the Torres Strait Island Region.

The island is located near the Great Barrier Reef and north of Coconut Island (also called Poruma) and northwest of Murray Island and west of Darnley Island.

The Torres Islander people of the island are of Melanesian origin and hold close kinship ties with the Islander people of Darnley Island (Erub) and Murray Island (Mer). The traditional owners of Stephens Island call themselves the Ugarem-Le. The Ugarem-Le lived in village communities following traditional patterns of hunting, fishing, agriculture and trade for many thousands of years before contact was made with European visitors to the region.

The people of Stephens Island call themselves Ugarem Le, and are the same people as the neighbouring Erubam Le of Erub (Darnley Island), the Meriam Le and Nog Le of Mer (Murray), the Dauarab Le of Dauar and the people of Waier. The traditional language of these islands is Meriam Mìr, of which there were formerly two dialects, Erub-Ugar and Mer-Dauar-Waier.

The island's European name was bestowed by Captain William Bligh in 1792 during his second breadfruit voyage to the Pacific, after Philip Stephens, First Secretary to the Admiralty.

In September 1792, Captain William Bligh, in charge of the British Navy ships Providence and Assistant, visited Torres Strait and mapped the main reefs and channels. Bligh gave Stephens Island its name. In 1793, the merchant vessel Shah Hormuzear and the whaler Chesterfield anchored off Darnley Island. A party of 6 sailors were killed by the Islanders when they were discovered polluting Darnley Island’s only supply of fresh water. In retaliation the Captains Alt and Bampton ordered the destruction of huts, canoes and gardens on Darnley Island and several Islanders were killed. Captains Alt and Bampton next travelled to Stephens Island in search of a boat which went missing during the attack. The Ugarem-Le shot arrows at the sailors when they landed on the Island. The crew returned with gunfire and set fire to a village on Stephens Island.

In the early 1860s, beche-de-mer (sea cucumber) and pearling boats began working the reefs of Torres Strait. In June 1879, the Queensland Coast Islands Act 1879 was passed by the Queensland Government, allowing it to claim all Torres Strait islands including Stephens Island, beyond the previous 60 mile limit. This Act enabled the Queensland Government to control and regulate the beche-de-mer and pearling industries, which previously had operated outside its jurisdiction. A beche-de-mer station was established on Stephens Island in the 1880s by a man named Wilson.

Torres Strait Islanders refer to the arrival of London Missionary Society (LMS) missionaries at Erub in July 1871 as "the Coming of the Light". Around 1900, the LMS missionary Rev. Walker established a philanthropic business scheme named Papuan Industries Limited (PIL). PIL encouraged Islander communities to co-operatively rent or purchase their own pearl luggers or "company boats". The "company boats" were used to harvest pearl shells and beche-de-mer, which was sold and distributed by PIL. The people of Stephens Island made arrangements to purchase their first company boat in 1905. Company boats provided Islanders with income and a sense of community pride and also improved transport and communication between the islands.