Captain James Cook named Cape Gloucester on his voyage of exploration up the Australian coast in 1770. This "cape" turned out to be an island, and Gloucester Island dominates the view from Bowen's eastern beaches. Behind the island is a bay that forms an excellent port, which the town came to be built around. This bay was eventually discovered in 1859 by Captain Henry Daniel Sinclair, in response to a reward offered by the colony of New South Wales for finding a port somewhere north of Rockhampton. Sinclair named Port Denison after the colonial governor of New South Wales.
Two years later, Sinclair led one group of settlers by sea, and George Elphinstone Dalrymple led another party overland from Rockhampton. They met on 11 April 1861 at Port Denison and founded the town of Bowen on the next day, 13 April 1861. By this time, the separate colony of Queensland had been established, and the town was named after Queensland's first colonial governor, Sir George Ferguson Bowen.
Port Denison Post Office opened on 1 April 1861 and was renamed Bowen by 1865.
In 1863, the new settlers discovered a sailor, James Morril, who had been shipwrecked 17 years previously just to the north of Bowen. Morril made his home in the new town, and his grave is still to be seen in the Bowen cemetery.
The coral reefs around Bowen have several shipwrecks, including the SS Gothenburg which sank in 1875 with a loss of more than 100 lives. Numerous relics of Bowen's history, from the Aboriginal past onwards, are on display at the Bowen Historical Society's museum.
During World War 2 Bowen hosted an air force base, flying PBY Catalina flying boats to search for enemy ships and submarines. The concrete aprons and ramp are still present (2013), and silhouettes of two aircraft have been painted in.