Charles Town was established in 1786 by Charles Washington, brother of George Washington. Charles Washington’s house Happy Retreat still stands in the town. Charles Town became the county seat when Jefferson County was formed from Berkeley in 1801. After the Civil War, the county government was moved briefly to Shepherdstown, returning to its original location in 1871. Charles Town's Spirit of Jefferson—Farmer's Advocate is now the oldest continuously published newspaper in the state.

Two treason trials were held in the courthouse at Charles Town. The first trial was of abolitionist John Brown and the raiders who survived his 1859 raid on the Harpers Ferry Armory and Arsenal; Brown was convicted and hanged in Charles Town. A second series of treason trials was held at the same site in 1922, during the West Virginia Mine Wars. The defendants, including union leader Bill Blizzard, were not convicted of treason. For its national significance, the Jefferson County Courthouse was designated as a National Historic Landmark in 2023.

Martin Robison Delany, born in Charles Town, worked with John Brown before the raid in the framing of Brown's provisional constitution. During the Civil War, Delany became the first Black field officer in the U.S. military. Charles Town is also the birthplace of poet, critic, and novelist John Peale Bishop (1892-1944), who used it as the location for a series of short stories dealing with the effects of the Civil War on the town and vicinity. Bishop's novel Act of Darkness incurred the wrath of his neighbors for its transparent use of local residents. Author Julia Davis also lived much of her adult life near Charles Town.

Charles Town was the home of Postmaster General William L. Wilson, who in 1896 established the first rural free delivery service in the United States, with the route running between Charles Town and nearby Uvilla and Halltown.

Hollywood Casino at Charles Town Races is a popular horse racing track and gaming site. The historic Old Opera House is an arts center and home to a local theater group.

In 2020, the town's population was 6,524, the highest total in its history and an 80.9 percent increase from a decade earlier.