The headquarters of Psebay was founded in 1857 by Colonel M. D. Likhutin, who commanded the Sevastopol regiment. This regiment was formed that same year from five Black Sea line battalions. The settlement was located on the banks of the Psebayka River, a specially dug canal, as mountain dwellers often kidnapped women washing clothes on the Little Laba. Psebay served as a forward and later a support point for the Labinsky detachment. Families of retired and active soldiers settled around the headquarters, gardens were cultivated, and workshops were opened. However, after the regiment left, life in the headquarters faded and fell into decline.

By 1862, Cossack families from the Novopokrovskaya stanitsa began to arrive in Psebay. Soldiers serving on the Labinsk line were allowed to bring their families from the central provinces. The first houses have not survived, except for the Holy Transfiguration Church, built by the Transfiguration regiment in 1858. Initially, the settlement was small, consisting of 34-35 houses. The only street, called "Boulevard," stretched from the church to the school. In 1873, the settlement became a Cossack stanitsa.

In 1894, Emperor Nicholas II issued a decree that soldiers who had served more than 17 years would receive a land allotment of 3 desyatinas per person. By this time, the stanitsa had expanded, and there was a need for new streets. As a result, the stanitsa was divided into two parts: one inhabited by Cossacks, the other by soldiers (outsiders). The division occurred in 1890. In the same year, Cossacks who did not wish to attend the Holy Transfiguration Church built the Church of St. Michael, which is now in ruins.

Historian and local historian A.N. Dyachkov-Tarasov, who visited Psebay in the early 1900s, described the deplorable state of the former military part of Psebay: "The Psebay fortification presents a sad sight: long, half-ruined barracks with red iron roofs; in places, the roofs are damaged; plaster has fallen off at the corners, exposing brick and stone; the regimental church has tilted and threatens to collapse: windows are broken in places, doors and gates are boarded up. From the church square to the abandoned linden boulevard, past dilapidated houses that were once well-kept, leads the only paved street."