Port Henry is in a tract of land set aside by the British Crown for veterans of the Seven Years’ War (also known as the French and Indian War). Although a mill was built in 1765, no other European-American settlers arrived until 1785, after the American Revolutionary War. The Iroquoian-speaking Mohawk and Oswegatchie, members of the Seven Nations of Canada, were still living in the town until after 1800. Most of the Iroquois from the territory of New York had been resettled in Canada, forced out of New York and the United States due to their alliance with the British during the war.
In the early years, timber harvesting was a major industry and 20 mills were located in the area. The first dock was built on Lake Champlain by 1820 for shipping lumber to other ports.
Early settlers discovered iron ore a few miles inland. Its extraction and processing became an important industry in the township for about one hundred and fifty years. A blast furnace constructed in 1822 in Port Henry was one of the first in the United States, and Republic Steel established major operations in the county. The village residents used Lake Champlain and the Hudson River to transport its ore and products to major markets such as Albany and New York City. Later a railroad connected the village to markets.
The Village of Port Henry was incorporated in 1869.
By the end of the 19th century, residents harvested smelt from the lake for the restaurant trade, by ice fishing. This became important winter recreation and continues to attract tourists.