In 1823 the General Assembly of Tennessee passed an act to establish two new counties immediately west of the Tennessee River, Dyer County being one of them. John McIver and Joel H. Dyer donated for the new county seat, named Dyersburg, at a central location within the county known as McIver's Bluff. In 1825, Dyer surveyed the town site into 86 lots. The first courthouse was built on the square in 1827. The current Classical Revival-style courthouse, designed by Asa Biggs in 1911, centers a downtown historic district listed in the National Register of Historic Places.
Situated as the hub of steamboat navigation on the Forked Deer River, Dyersburg grew as a river town, especially once the Grey Eagle made the first successful steamboat trip in 1836. The county's first industrial boom dates to 1879, when the steamboat Alf Stevens shipped timber from A. M. Stevens Lumber Company of Dyersburg to St. Louis, Missouri markets. The Stevens company established a large sawmill in 1880 and opened a planing mill in 1885. The Bank of Dyersburg opened in 1880, while another timber industry, Nichols & Co. Wooden Bowl Factory, began operations in 1881.
The arrival of the Newport News and Mississippi Valley Railroad in 1884 further expanded market possibilities; a branch line, the Dyersburg Northern, soon linked the county seat to Tiptonville. The new railroad links encouraged the creation of new industries and businesses. In 1884, for example, investors established the Dyersburg Oil Company, a cottonseed factory. This company remained locally important through the twentieth century.
Between 1909 and 1914, Dyersburg emerged as a regional railroad hub as it became the junction point for three different lines, led by the Illinois Central Railroad.
During World War II, an emergency landing strip was built in Dyersburg. Industry continued to expand and Dyer County became a regional medical, educational, retail and distribution center. The establishment of Dyersburg State Community College in 1969 enhanced educational and cultural opportunities in the county.
In the last two decades, two major highway projects have modernized the city's transportation system: Interstate 155 links Dyersburg with Caruthersville, Missouri, via the Caruthersville Bridge, the only highway bridge over the Mississippi River between Cairo, Illinois, and Memphis. The four-lane expansion of U.S. 412 connects Dyersburg to I-40 at Jackson.
On March 5, 1963 a Piper Comanche plane carrying country singers Patsy Cline, Hawkshaw Hawkins, Cowboy Copas, pilot and Miss Cline's manager Randy Hughes stopped for gas in Dyersburg. The plane crashed just 20 minutes later in inclement weather near Camden, Tennessee.
Dyersburg was mentioned in the lyrics of the song, "Tennessee" written and performed by the 1990s Hip Hop group Arrested Development.
On September 17, 2003, Harold Kilpatrick Jr. took 18 people hostage in a classroom at Dyersburg State Community College. He wrote a note saying he "wanted to kill some people and die today" and claimed to be a part of al-Qaeda. Kilpatrick suffered from a severe case of schizophrenia and paranoia. Since he had been without health insurance for some time, he was not on the appropriate medications and his mental disabilities are believed to be the cause of his actions. Upon locking himself and his hostages in an upper story classroom, his only demands were a pizza and some water. Police would not let any of his family members near the facility, though his sister tried desperately to convince the police that she could help and that her brother needed mental medical attention urgently. After nine hours or more, a single gunshot sounded from inside the classroom, which caused the Dyersburg police to take action. They forcibly entered the room and opened fire, killing Kilpatrick and wounding two students. Hostages from that day have described Kilpatrick as being rather friendly, though nervous, and that he had dropped his gun causing an accidental discharge (the shot the police heard).