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It is also a sub-basin of the Gulf Of St. Lawrence and is named for the many small Island s that are scattered throughout it, some of which were populated for generations with Fishing families, but since the mid 20th Century the islands are used mainly for recreational camping and cottages.

Flowing into the Bay of Islands is the Pulp And Paper mill at Corner Brook turned them into paper products. Today this mill is owned by Kruger Inc and its logs are transported by truck. Although the river is mainly used for recreational purposes, the bay still sees active shipping to and from Corner Brook's port.

Other towns along the shores of the Bay of Islands are mostly dependent upon the fishing industry. These communities include (on the southern shore of Humber Arm , the southernmost bay) Mt Moriah, Humber Arm South, and Lark Harbour, (on the northern shore of Humber Arm) Hugh's Brook, Irishtown-Summerside, Meadows, Gillams, McIvers, and (on Middle Arm, north of Humber Arm) Cox's Cove. There are still fish plants in Cox's Cove and Curling. Curling was once an incorporated communitity but is now amalgamated with Corner Brook.