As the ancient site, Sagara City, old Dawei, which is approximately 6 miles north of the present city, has so many traces of Pyu culture, it was recognized as one of the province capitals in the ancient Pyu era.

The evidence of burial urns, beads, coins and other features of Pyu culture have been excavated in the area by the Department of Archaeology and National Museum, Myanmar.

In the late 1740s, during the Burmese civil war of 1740–1757, Dawei, along with the northern Tenasserim coast, was taken over by Siam.

Burma regained the city in 1760 and extended its control over the entire Tenasserim coast, in 1765.

After independence in 1948, the city became part of the Tenasserim Division, which also included today's Mon State.

A transnational highway and a railway line across the Tenasserim Hills connecting Dawei and Bangkok[2] are planned if a proposed deep water port project goes ahead.

Work ceased on this line in about 2012 but several partly constructed sections with bridges over rivers are visible on Google Earth.

[11] The Dawei Special Economic Zone would become Myanmar's first special economic zone (SEZ), which includes plans to develop a 250 square kilometres (97 sq mi) industrial estate, with sea, land (railway and road) infrastructure links to Thailand, Cambodia, and Vietnam, as well as a gas pipeline to Thailand's Kanchanaburi Province and commercial and residential developments.