The first structure in what is now Sheerness was a fort built by order of Henry VIII to prevent enemy ships from entering the River Medway and attacking the naval dockyard at Chatham. In 1666 work began to replace it with a stronger fort. However, before its completion, this second fort was destroyed during the 1667 Dutch Naval Fleet as part of what would be known as the raid on the Medway.
The Secretary to the Admiralty, Samuel Pepys, subsequently ordered the construction of Sheerness Dockyard as an extension to that at Chatham. There was no established settlement in the vicinity of Sheerness, so most of the workers were initially housed in hulks. By 1738, dockyard construction workers had built the first houses in Sheerness, using materials they were allowed to take from the yard. The grey-blue naval paint they used on the exteriors led to their homes becoming known as the Blue Houses. This was eventually corrupted to Blue Town (which is now the name of the north-west area of Sheerness lying just beyond the current dockyard perimeter). The modern town of Sheerness has its origins in Mile Town, which was established later in the 18th century at a mile's distance from the dockyard (Blue Town having by then filled the space available).
In 1797, discontented sailors in the Royal Navy mutinied just off the coast of Sheerness.
By 1801 the population of the Minster-in-Sheppey parish, which included both Sheerness and the neighbouring town of Minster, reached 5,561. In 1816, one of the UK's first co-operative societies was started in Sheerness, chiefly to serve the dockyard workers and their families. The Sheerness Economical Society began as a co-operative bakery but expanded to produce and sell a range of goods. By the middle of the 20th century, the society had spread across the Isle of Sheppey and had been renamed the Sheerness and District Cooperative Society.
In the early 1820s a fire destroyed the old Blue Houses. New houses and a major redevelopment of the dockyard followed. A high brick wall and a moat were constructed around the yard to serve as a defence measure and remained in place until the end of the 19th century. As the settlement expanded eastwards, away from the dockyard and the Blue Houses, the wider area became known as Sheerness, taking its new name from the brightness or clearness of the water at the mouth of the River Medway. The rebuilt Dockyard contained many groundbreaking new buildings and structures; for example, completed in 1860 and still standing today, the Sheerness Boat Store was the world's first multi-storey building with a rigid metal frame.
From the completion of the dockyard until 1960 Sheerness was one of the bases of the Nore Command of the Royal Navy, which was responsible for protecting British waters in the North Sea. The command was named after the Nore sandbank in the Thames Estuary, about 3 miles (5 km) east of Sheerness.
In 1863, mains water was installed in the town, and the Isle of Sheppey's first railway station opened at the dockyard. Towards the end of the 19th century, Sheerness achieved official town status and formed its own civil parish, separate from Minster-in-Sheppey. The 1901 Census recorded the Sheerness parish as having 18,179 residents and 2,999 houses.
The town's low rainfall and ample sunshine made it popular as a seaside resort, with tourists arriving by steamboat and train. The Sheppey Light Railway opened in 1901, connecting the new Sheerness East station with the rest of the island. However, by 1950, lack of demand led to the railway's closure. The Sheerness and District Tramways, which opened in 1903, only lasted until 1917.
Terraced houses near the seafront
In 1944 the United States cargo ship SS Richard Montgomery ran aground and sank 1 mile (1.6 km) off the coast of Sheerness, with large quantities of explosives on board. Due to the inherent danger and projected expense, the ship and its cargo have never been salvaged; if the wreck were to explode, it would be one of the largest non-nuclear explosions of all time. A 2004 report published in New Scientist warned that an explosion could occur if sea water penetrated the bombs.
During the Second World War the Shoeburyness Boom, which ran across the Thames Estuary to protect shipping from submarine attack, ran from Sheerness to Shoeburyness in Essex. A similar structure was built along the same alignment in the early 1950s to protect against Soviet submarines. The Sheerness end of the boom was demolished in the 1960s.
In March 1960 the Royal Navy ceased operating the Sheerness dockyard and the Medway Port Authority took over the site for commercial use. The dockyard closure led to thousands of job losses, and most of the nearby houses and shops in the Bluetown area were eventually abandoned and demolished. By the 1961 census, the population of Sheerness had fallen to 13,691. The dockyard closure also led to the decline of the Sheerness and District Cooperative Society, as many of its members were dockyard workers. At the time, the society was the island's main retailer, but it has since been reduced to a few shops and been merged with a larger society.
In 2003, the Beachfields Park project was organised to publicise Beachfields' heritage and to preserve it for future generations. Students of Cheyne Middle School and Minster College, with assistance from local organisations, researched the funfair, bandstands, Prisoner of the War hut, boating lake and bowling green. As part of the project, students wrote a book, Tales of Beachfields Park, which won the Historical Association Young Historian Primary School Award for Local History.
As of 2007, Bluetown is an industrial area, and Sheerness has become the largest port in the UK for motor imports. Prior to the closure of the Dockyard, twenty-five of its historic buildings were listed in recognition of their "architectural distinction and value"; regardless of this, the majority were subsequently demolished (including Admiralty House and the quadrangular Great Store) and others were left to decay. In the early 21st century a concerted effort was made to save the remaining buildings and several have been restored to residential use. In July 2013 Swale Borough Council announced that a deal had been reached to secure restoration of Rennie and Taylor's Royal Dockyard Church (which had been gutted by a fire in 2001), with a view to new uses such as displaying the above-mentioned model of the Dockyard.