The story
Argus + eye + -ed, a parasynthetic formation (compare blue-eyed, eagle-eyed). From Argus Panoptes (Ἄργος Πανόπτης (Árgos Panóptēs, “all-seeing Argus”), from πᾶν (pân, “all”) + ὄπτης (óptēs, “one who sees”)), a many-eyed giant of Greek mythology who served Hera as a watchman. Set to guard Io, a priestess whom Zeus had transformed into a heifer, Argus kept unceasing watch because some of his hundred eyes always remained open; he was eventually lulled asleep and slain by Hermes, after which Hera set his eyes into the tail of the peacock. His name became proverbial for unsleeping watchfulness, whence the adjective. Attested since before 1500. Compare the roughly contemporaneous Argus-like (from 1597), and the unrelated-in-sense but same-eponym argus (“a butterfly marked with eyespots”).
Etymology from Wiktionary, CC BY-SA 4.0.