Isamu is ruled by its Daimyo who makes decisions pertaining to entering war, economics, and such. The Daimyos are known as the ones that founded the city, despite being an Amestrian city. This may have been another reference to Kisara's statement of Isamu having been captured by Central and then forced to become an Amestrian city, though the truth of the matter remains unknown. Despite having a Daimyo, Isamu is subject to command from Central or the Furher, which may be a reason its current Daimyo, Kisara, married the current Furher, Roy Mustang.
Isamu was officially founded shortly after the founding of the entirety of Amestris, around 1510 by the first Daimyo, whose name remains unknown, due to the coming of the “Philosopher of the East”, whom wasn't trusted by the Daimyo. Isamu was originally a small town around the size of Resembool, but eventually became a town around the size of Central.
Since the First Daimyo's instatement, Isamu has become a bustling and well-protected city, despite being close to Briggs, which seperates Drachma and Amestris. It was within years of its creation that Isamu began to become well-known for its military powers.
In November 1558, later in the year after Amestris first declared war with the nation west of the country by invading the city of Riviere, Isamu was forced into a bloody war with an unnamed neighboring city-state, in which the first Daimyo was killed and the second Daimyo was instated. This war ended in December the same year, due to the military power the second Daimyo brought.
Shortly after the war at an unknown time, the second Daimyo passed away and Isamu was left without a Daimyo until shortly after the start of the series, in which Kisara took over the position, after meeting Edward Elric.