Joseph Chapline was the first to settle in the area, circa 1740. At the end of the French and Indian War in 1763, Chapline founded a town, naming it in honor of his friend Horatio Sharpe, the Proprietary Governor of the Province of Maryland. Its original settlers were mostly of German or Swiss origin.
Located east of the Potomac River, Sharpsburg attracted industry in the early 19th century, especially after the Chesapeake and Ohio Canal was extended to Sharpsburg in 1836. The town was incorporated in 1832.
Sharpsburg gained national recognition during the American Civil War, when Confederate General Robert E. Lee invaded Maryland with his Army of Northern Virginia in the summer of 1862 and was intercepted near the city by Union General George B. McClellan with the Army of the Potomac. The rival armies met on September 17, in the Battle of Antietam (also called the Battle of Sharpsburg). It would be the bloodiest single day of the Civil War, and in American military annals, with a total of nearly 23,000 casualties to both sides. A few days earlier, the multi-sited Battle of South Mountain occurred at the three low-lying passes in South Mountain—Crampton's Gap, Turner's Gap, and Fox's Gap—where Lee's forces attempted to hold back the advancing Union regiments moving westward especially along the important National Road (now U.S. Route 40 Alternate) which is now a part of South Mountain State Battlefield Park.
The drawn battle is considered a turning point of the war, since it kept the Confederacy from winning a needed victory on Northern soil, which might have gained it European recognition. Lee's retreat gave Abraham Lincoln the opportunity he needed to issue his Emancipation Proclamation, declaring all slaves in Confederate territory to be free. This act made it even more unlikely that Europe would grant diplomatic recognition to the South.
Sharpsburg claims its Memorial Day commemoration as one of the first in the U.S., having their 144th consecutive celebration in 2011. The city also celebrates an annual Heritage Festival in mid-September.
The Antietam National Battlefield is an important source of local tourism and activities.