Nexø originated as a fishing village for the parish of Bodilsker with a chapel attached to St Bodil's Church. In 1346, it was granted rights as a market town, dealing in both the herring trade and in agricultural products. Over the centuries the town has suffered a number of disasters. The Lübeckers burnt the town in 1510, in 1563 most of the inhabitants died from the plague and in 1645 it was plundered by 500 Swedish soldiers. In 1756 there was another serious fire and in 1872 a storm damaged the harbour.
Around 1800, the town became Bornholm's administrative centre. In 1806, 21 ships and 47 boats were registered with Nexø as their home port. In 1879, a new harbour basin was completed and, in 1892, Denmark's first communal dry dock was opened. There were a number of subsequent extensions to the harbour facilities. The 19th century also saw the development of ship building, the foundation of an iron foundry (1864) and of the Østbornholmske Dampskibsselskab (East Bornholm Steamship Company) which operated a regular service to Copenhagen from 1877.
At the end of the Second World War, on 7 and 8 May 1945, Nexø (like Rønne) was bombed by the Soviets causing the total destruction of the town centre around the harbour and the main square. To ease the ensuing housing problem, the Swedish State donated 175 wooden houses to the town.
Between 1900 and 1968, a railway connected Nexø with Rønne, the island's largest town. The old station building at Rønne is still preserved, whilst Nexø is now host to a railway museum. The former Nexø Municipality (1970–2003) covered an area of 104 km (40 sq mi) with a population of 8,558, but is now included in Bornholm Municipality
