Gustavus, formerly known as Strawberry Point, lies on the outwash plain created by the glaciers that once filled Glacier Bay. Two hundred years ago, it was primarily a single large "beach". The native Tlingit and others used the area for fishing, berry picking, and other similar uses. The town itself is less than one hundred years old. The first settlers arrived in 1914, but left shortly afterward. The first permanent homestead was established in 1917, when Abraham Lincoln Parker moved his family to Strawberry Point. Many Gustavus residents are descendants and relatives of the original Parker homesteaders.
In 1925 the name became Gustavus, when the U.S. Post Office required a change for its new post office, although locals continued calling it Strawberry Point long afterwards. The new name came from "Point Gustavus" at the mouth of Glacier Bay.
In 1793 George Vancouver named Point Adolphus (today a well-known humpback whale feeding area) after Adolphus Frederick, seventh son of King George III. In 1878, W.H. Dall, while working on a coastal survey, saw "Adolphus" on the map and assumed it was for Swedish king Gustavus Adolphus. The point across Icy Straits from Point Adolphus at the mouth of Glacier Bay was not named on the map, so Dall called it "Gustavus". Another possibility is that Dall named Gustavus for Gustavus C. Hanus, a Naval Academy graduate who had extensive experience throughout southeast Alaska, and both Dall and Hanus served with the Coast Survey in Alaska. Hanus laid out the first streets in Juneau and helped quell the trouble in Klukwan in 1881.
There is still a large beach at Gustavus, with many strawberries. It is surrounded on three sides by Glacier Bay National Park and Preserve, and on the fourth side by water. The area is a temperate rain forest; spruce and hemlock trees reach heights of , and alders, balsam poplar, fern, mosses, fireweed, lupine, and other plants are also common. Gustavus's coastal location gives it a relatively mild winter. Summer temperatures range from ; winter temperatures from .