The town of Clay is the county seat of Clay County. In 2020, Clay had a population of 399, a 32.7 percent decline since 2000 and 57.5 percent decrease from its peak of 940 in 1980. It is located about 41 miles northeast of Charleston on State Route 16, which doubles as Main Street in Clay. The town is situated on the banks of the Elk River near the center of Clay County, at an elevation of 708 feet. The Elk cuts a fairly deep gorge as it traverses this particular section of the county and does not provide much bottomland for the town, making growth difficult.

After Clay County was created in 1858 by the Virginia General Assembly, the first county court met at the McOlgin farm, the present site of Clay. As the community grew it was first called Marshall, and apparently Henry for a short while, before becoming Clay Court House and then Clay. Both the county and the town were named for Senator Henry Clay of Kentucky, a leading statesman of the era. Elk River was the prime means of transportation in the early years, with Governor MacCorkle noting in his memoirs that until 1880 it was impossible to drive a horse-drawn vehicle to the town from Charleston. Clay was incorporated in 1895. The Coal & Coke Railway reached Clay in 1905.

The June 2016 flood badly damaged the town and nearby communities. After fire destroyed a local grocery business, there no fresh produce stores left in Clay. The Small Town Market opened in 2020 to fill this role but closed in 2023.

The town of Clay includes a satellite area known locally as Two Run, which contains some of the newer business establishments.