The first white settler to the area was Joseph Bailly, a French fur trader. He established a home and fur trading post in 1822 to do business with the Potawatomi Tribe. The original site and some of his buildings are preserved and open to the public at the Indiana Dunes National Lakeshore. Mau-Me-Nass, a Potawatomi woman was the first owner of land in what is now Chesterton. She received the land from a government treaty. It passed on to her father, Pier Moran, and eventually to the Thomas family. In 1852, the WilliamThomas family platted the original downtown area of 46 lots into a village they named Calumet, which is now the original platted area of the Town of Chesterton.

    The arrival of the Michigan Southern and the Michigan Central railroads into Westchester Township in 1852 was the incentive for the Thomas family to plat the Town. A railroad station was established in Chesterton. Since it was the only station in Porter County until 1872, the Town became an important railroad shipping center. At one time, the Michigan Central ran 24 trains a day through the Town.

    In 1872, brickyards were established in an area called Hageman, which is now a part of Porter. As the railroads continued to expand westward, they based many section bands at Chesterton and area farmers did a thriving business supplying wood to the railroads for engine fuel. The wood yard was established on land provided by the Thomas family. The yard area eventually became Thomas Centennial Park. The section hands were mostly of Irish descent, and, in 1857, the railroad assisted them in establishing the first church in Chesterton, St. Patrick's.

    Chesterton was first incorporated on October 5, 1869, ending the use of the former name, Calumet. The first post office in Porter County was established at Coffee Creek, east of Morgan Park, in 1833. Jesse Morgan, the patriarch of the Morgan klan, came to the area in that year and remained postmaster until 1853. He had a stage house on old Chicago Road that ran through his farm. Thus, Calumet and Coffee Creek became almost synonymous until the incorporation of Chesterton in 1869. Some of the earliest businesses in Chesterton were the Thomas Wiesemann's Resale Stand, Dr. Hiram Green's drug store, and Horace Pratt's blacksmith shop. The M. Smith & Son building was the oldest mercantile location in Town.

The community continued to grow and prosper over the years. When C. O. Hillstrom moved his organ factory to Chesterton from Chicago in 1880, it became the main industry in Town. The market for their organs was worldwide. Other industries also came to Chesterton and thrived until the panic of 1893 forced the closing of much of Chesterton industrial base. However, the Town survived and began a slow recovery and growth with the coming of the new century.

In the early 1900's, Chesterton served as a major commercial hub of activity in the area between Chicago and Michigan City. The development of a major brick yard, several railroads, and the electric interurban line contributed to the ability of the area to support both residential and commercial development. The rebuilding of the downtown, which burned in 1902, with brick buildings also contributed to the image as the center of commerce in the area.

 One cannot disregard the impact of the steel industry to the growth and prosperity of the area. US Steel Works opened its first mill in 1905 creating employment opportunities for residents and potential residents who could easily commute to jobs at the Gary mills. This trend continued, when National Steel constructed its newest facility in the late 1950's  and Bethlehem Steel opened its doors in the mid 1960's.

Water transportation was also a vital component of job stimulation for Chesterton residents. Created in 1961, the Indiana Port Commission began dredging of the harbor in 1967 at Burns Harbor for one of the largest and most active lake ports in the Great Lakes system.

In 1923, one of the most significant and long lasting events took place influencing the future of the Town of Chesterton. In this year, the Indiana Dunes State Park was established resulting in the acquisition, in 1925, of 440 acres of land. In 1966, the Indiana Dunes National Lakeshore was established and additional lands continued to be added to the State and National parks.