The Greek name, Kerkyra or Korkyra, is related to two powerful water deities: Poseidon, god of the sea, and Asopos, an important Greek mainland river. According to myth, Poseidon fell in love with the beautiful nymph Korkyra, daughter of Asopos and river nymph Metope, and abducted her. Poseidon brought Korkyra to the hitherto unnamed island and, in marital bliss, offered her name to the place: Korkyra, which gradually evolved to Kerkyra (Doric). They had a child they called Phaiax, after whom the inhabitants of the island were named Phaiakes, in LatinPhaeaciani. Corfu's nickname is the island of the Phaeacians.

The name Corfù, an Italian version of the Byzantine Κορυφώ (Koryphō), meaning "city of the peaks", derives from the Byzantine Greek Κορυφαί (Koryphai) (crests or peaks), denoting the two peaks of Palaio Frourio.