A largely fishing settlement, the town in the early twentieth century grew as an anchoring harbour of the small sailing vessels transporting goods between Colombo and Jaffna.

The town has a District Secretary's office, many other government institutions and schools located in and around the area.

During the Kandyan Wars, the British government house in Mullaitivu was attacked by forces of Pandara Vanniyan and Dissava of Nuwara Kalawiya who laid siege to the fort.

Following this the Sri Lankan armed forces withdrew from Mullaitivu which allowed the LTTE to gain control of the area.

The Sri Lankan Army took control of the town on January 25, 2009, in the Battle of Mullaitivu in its offensive against the LTTE.