Native Americans inhabited what would become northeastern Massachusetts for thousands of years prior to European colonization of the Americas. The area that would become Manchester was inhabited by Agawam people at the time of contact in the early 1600s, who were decimated by virgin soil epidemics especially in 1617–1619, after which fewer than 50 indigenous individuals are estimated to have survived within the modern bounds of Manchester.

Manchester was first settled by English colonists in 1629 and was officially incorporated in 1645. It was formed from territory taken from Salem (that portion since given to Beverly) and Gloucester. In 1700, Manchester selectmen paid three grandchildren of Agawam sachem Masconomet three pounds and nineteen shillings for the rights to the land.

The community thrived primarily as a fishing community for more than 200 years. Beginning in 1845, it started to attract summer residents from the Boston area after poet Richard Dana built a house in the town. Over the next fifty years, development of summer houses along the coastline established the community as Boston society's community of choice for summer residency. The trend continued with designs of houses by architects, such as "Sunny Waters", designed by John Hubbard Sturgis for his older brother, Russell, in 1862.

The best known of these "summer cottages" was Kragsyde, built on Smith's Point in 1883. Commissioned by George Nixon Black, the Peabody and Stearns-designed residence has been hailed as the zenith of the Shingle style substyle of the Queen Anne style of architecture. It was demolished in 1929.

Name

To prevent confusion with the nearby and much larger city of Manchester, New Hampshire, the name of the town was officially changed in 1989 following a close town meeting vote that year, where it passed by just two votes. This was ratified by an act of the state legislature passed on September 25, 1989. "Manchester by the Sea" was a familiar alternative town name since it was first used in 1877 by Boston publisher James T. Fields while attending an annual summer picnic of the "Manchester Elder Brethren" that still takes place today.

The name change was driven by Edward Corley, a longtime resident of Manchester. All town documents, and the town seal, now use the name "Manchester-by-the-Sea". As a result of some minor resident activism, so do the majority of public and private lists of Massachusetts cities and towns, including that of the state government.

• Agassiz Rock

• Masconomo Park

• Coolidge Reservation

• Crow Island

• Kragsyde

• Smith's Point

• Manchester Historical Museum (Trask House)

• Tucks Point

• Cathedral Pines

• One mile from the town center is Singing Beach, so named because the sand comprising the beach squeaks when walked upon. The sand is also an iridescent color when the sun sets. This beach is quite popular during summer months in particular because it is easily accessible from Boston by a half-mile walk from the MBTA train station. Also located on this historic beach is the famous tourist attraction "Eaglehead", a rock composite that is the focal point of rock climbing and other recreation activities.

• Magic Years Cooperative Nursery School

• Manchester Essex Regional School District

• Manchester Memorial Elementary

• Manchester Summerstage

• North Shore Nursery School

• Tara Montessori School

In 2000, the town approved a plan to create a regional school district with Manchester-by-the-Sea. Under the plan, the two towns are served by a consolidated school system, the "Manchester-Essex Schools", and a new high school.

In early 2006, the voters of both Essex and Manchester by the Sea approved a new $49 million regional school project for the purpose of building a new Middle School and High School. Both projects were approved at Town Meeting and then again at the ballot box for a debt-exclusion which will permit the towns to raise funds in excess of the 2.5% property tax cap mandated by Prop. 2.5. A similar $36 million plan three years earlier was defeated in Essex at the polls and approved in Manchester. Construction was completed in the summer of 2009, and students began attending the new middle-high school in the fall of 2009.