Before the adventure begins, Tellah is living here with his daughter Anna. Edward Chris von Muir, the prince of Damcyan, travels to Kaipo disguised as a Bard, and he and Anna fall in love. Tellah does not consent to their union, so they elope and run away to Damcyan. Tellah then tries to pursue them, but he cannot defeat the Octomammoth, a monster living in the Underground Waterway that connects Kaipo to Damcyan.
The Dark KnightCecil Harvey arrives here eventually with a wounded girl from Mist. He lets her rest at the inn, but she will not speak to him. That night, some soldiers from Baron enter the inn and demand that Cecil hand over the girl, a Summoner, as the King of Baron had proclaimed that the Summoners of Mist were too dangerous to be left alive. Cecil refused to hand her over, and defeated the Baron soldiers. The girl thanked him and introduced herself as Rydia, who then joined Cecil's adventure. The next morning, they heard that a sick girl from Baron was in the hospital.
Cecil found out that Rosa Joanna Farrell, his friend from Baron, had come down with a case of Desert Fever, and Cecil needed to find the Sand Pearl from the Antlion's Den to cure her. Cecil and Rydia went out in search of the Sand Pearl, and eventually found it and returned with Edward's assistance. They used the Sand Pearl on Rosa, and she recovered and joined the party. She informed them that the next target was the Crystal of Air at Fabul, and they needed to cross Mt. Hobs to reach the castle.
The night before the party left, Edward went out to the oasis and played his harp. A Sahagin appeared, and Edward had to defeat it. Anna's ghost appeared and told him to believe in himself and to be strong for the two of them. Edward managed to get over his sorrow, and was able to defeat the monster.
In Porom's Tale, she and Palom journey to Kaipo during Palom's journey to become a sage. Two graves to Tellah and Anna rest on the north side of town, and they pray to the two of them before heading to the waterway to train.
In Edward's Tale, Edward, Harley and several guards travel through the waterway to catch a ship to Baron, but Harley collapses from desert fever. Edward heads to the Antlion's Den in order to get a Sand Pearl to cure her.
In The Crystals, Yang and Ursula are being cared for here after their ship is destroyed by Leviathan on their way to Baron. After a visit to Yang's wife Sheila, the party uses her frying pan and ladle to knock the two monks to their senses.
After the Mist landslide, Cecil and the child Rydia have no choice but to take refuge in Kaipo. Automatically, the player will be walked to the Inn the first time he/she enters the town. A cutscene will then trigger, showing Baron soldiers who were ordered to kill Rydia. They are taken care of, and this earns Rydia's acceptance of the dark knight, and her place in the party.
After child Rydia joins Cecil, the player must go to the building north of the weapons shop. A Rosa with diagnosed fever rests within it under the care of a couple, who tell Cecil he must obtain a Sand Pearl for Rosa if she is to live. There is a bookshelf, and when prompted, it will inform the player about desert fever. After Cecil returns successful, Rosa is cured. The couple notes that Rosa has been calling for Cecil all the time she was sick, and tells Cecil to take care of her.
In the iOS version of Final Fantasy IV, the player can embark on a quest to find eidolons scattered around the world. The first eidolon is in Kaipo, and is drinking the oasis water "like crazy". He is around the place where the Item Lore augment is obtained.