The first mentions of Sillamäe refer to 1502 when Thor Bruggen opened a tavern here.
On territory of the city, there used to be 3 manor houses: Peuthof – church manor, Sillamägi-mõis, Türsel – knights manor.
Before the beginning of World War I the town was famous as a resort zone.
In 1928 in Sillamäe a slate processing factory and power station were open, later also a port.
A new stage of Sillamäe's development started after World War II. For a long time Sillamäe was not marked on a map, as the address of the town was used as a special code. You could only enter the town with special permission. Secret warfare industry was a reason for this.