W. Ferdinand Wentzell of the North West Company sent George Keith to establish a post here in 1805, making Fort Nelson the third oldest non-Indigenous settlement in British Columbia. The post was abandoned in 1813 but later re-established by the Hudson’s Bay Company in 1865, near the present airport. This post was destroyed by a flood in 1890. A Slavey band migrated here from Great Slave Lake about 1775; they became the Fort Nelson First Nation. Fort Nelson was an important centre en route to the Yukon from Edmonton during the Klondike Gold Rush.
An airport in 1941, the Alaska Highway in 1942 and completion of the British Columbia Railway extension from Fort St John in 1971 have all played roles in the area's expansion, making Fort Nelson the transportation and service centre for the region. It is known as Mile 300 on the Alaska Highway. The area grew rapidly in the late 20th century through developments in the forest industries and renewed interest in local natural gas and oil exploration and processing. While the natural gas sector is still strong, in 2008, the town's two forest-products plants closed. Tourism and agriculture also contribute to the local economy. A campus of Northern Lights College is located here.