The town of Federalsburg is located in the southern-most part of Caroline County at the headwaters of Marshyhope Creek, known in earlier days as the Northwest Fork (of the Nanticoke River). The place was settled as early as the 1690s by some of William Penn’s colonists, and its location on the river became a natural crossing point for travelers; the Nanticoke Indians had been fording the river there long before the settlers arrived. A store was established there in 1789, and a small village developed around it. But it was not until a bridge was built at the crossing in the early 1790s that the place’s potential for commerce began to be exploited. It was known simply as The Bridge until one day in 1812 when the town hosted a rousing mass meeting of the Federalist Party. Emotions ran high, and by popular demand the town’s name was changed on the spot to Federalsburg.

Probably, Federalsburg's earliest industry was shipbuilding; the surrounding white oak forests supplied the building material. The water at Federalsburg was too shallow for the ships to be launched there, so the hulls were conveyed to Brown's Wharf four miles down the river. There they were launched, outfitted, and sent off on their careers as Bay and river trading vessels. That industry died sometime before the Civil War.

Other industries centered around the mill dam at the town’s northern end. There, logs were converted to lumber, which was sent downstream for shipping to Baltimore. Fleece was processed to yarn, and wheat was ground and made into “Maryland Biscuits.” The dam was used as a source of power for these industries until the last mill burned in 1916.

River traffic with Baltimore and other smaller towns on the Chesapeake Bay began at an early date. Heavily loaded scows were pushed down the river by four or five men using long poles. At Brown’s Wharf, the cargo was reloaded onto schooners and other sailing vessels for its journey down the Nanticoke and out onto the Bay.

Before the Civil War, there was little cross-country traffic except for the stage-coaches carrying mail and passengers. The Seaford and Cambridge Division of the Pennsylvania Railroad opened on October 12, 1868, a date that marked the beginning of a new era in the history of Federalsburg. The railroad opened up the markets of Philadelphia, New York, and other northern cities to Federalsburg’s products— most importantly the perishable garden and orchard produce that could be transported successfully when refrigerated railroad cars were introduced.

Today, agriculture is a major element in the area’s economy, although two full-service industrial parks have been created to accommodate the growing diversity in the town’s economic base. New housing is keeping abreast, and rehabilitation of homes throughout the town is revitalizing neighborhoods. The town has a community park, and the Marshyhope Greenway, a two-mile recreational/nature trail along the banks of the scenic Marshyhope Creek, is enjoyed by walkers, joggers, bicyclists, skateboarders, and rollerbladers year round.

Federalsburg has planned for controlled growth, and its citizens are dedicated to seeing their town prosper. Anyone who cares to help is warmly welcomed.