The town played a role in the War of 1812 when, in 1813, a fleet under the command of Admiral George Cockburn moved up the Chesapeake Bay, where the shipyards of Saint Michaels presented an inviting target. In the nighttime Battle of St. Michaels the British bombarded the town, but failed to destroy the shipyards. As a result of the town's ruse of dimming the lights and hanging lanterns in the trees beyond the town, Saint Michaels became known as "the town that fooled the British". The Cannonball House which was struck by one of the shots is on the National Register of Historic Places, as is the Saint Michaels Historic District.
One of the town's chief attractions is the Chesapeake Bay Maritime Museum, located on land that was formerly part of the historic shipyards, and home to a number of historic bay vessels, including the bugeye Edna E. Lockwood, a National Historic Landmark, and several skipjacks.