Captain Curt von François founded Swakopmund in 1892 as the main harbour for the Imperial German colony—the deep sea harbour at Walvis Bay belonged to the British. The founding date was on August 8 when the crew of gunboat erected two beacons on the shore. Swakopmund was chosen for its availability of fresh water, and because other sites further north such as Cape Cross were found unsuitable. The site did, however, not offer any natural protection to ships lying off the coast, a geographical feature not often found along Namibia's coast.
When the first 120 Schutztruppe soldiers and 40 settlers were offloaded at Swakopmund, they had to dig caves into the sand for shelter. The offloading was done by Kru tribesmen from Liberia who used special boats. Woermann-Linie, the operator of the shipping route to Germany, employed 600 Kru at that time.
Swakopmund quickly became the main port for imports and exports for the whole territory, and was one of six towns which received municipal status in 1909. Many government offices for German South West Africa had offices in Swakopmund. During the Herero Wars a concentration camp for Herero people was operated in town. Inmates were forced into slave labour; approximately 2,000 Herero died.
Soon, the harbour created by the "Mole" (breakwater) silted up, and in 1905 work was started on a wooden jetty, but in the long run this was inadequate. In 1914 construction of a steel jetty was therefore commenced, the remains of which can still be seen today. After the First World War it became a pedestrian walkway. It was declared structurally unsound and was closed to the public for seven years, and in 2006 renovations to the portion supported by concrete pillars were completed, with a seafood restaurant and sushi bar being added to the end portion of the steel portion of the jetty soon after. A new timber walkway was also added onto the existing steel structure, and the steel portion of the jetty reopened to the public in late 2010.
Trading and shipping companies founded branches in Swakopmund. A number of these buildings still exist today. After German South West Africa was taken over by the Union of South Africa in 1915, all harbour activities were transferred from Swakopmund to Walvis Bay. Many central government services ceased. Businesses closed down, the number of inhabitants diminished, and the town became less prosperous. However, the natural potential of Swakopmund as a holiday resort was recognised, and this potential has subsequently been developed. Today tourism-related services form an important part of the town's economy.
After Namibian independence from South Africa in 1990 many street names were changed from their original German, or in some cases, Afrikaans names, to honour Namibians, predominantly Namibians of black heritage. For example, in 2001, then-president of Namibia Sam Nujoma renamed the main street (Kaiser-Wilhelm-Straße) Sam Nujoma Avenue in honour of himself.