Klawock's first settlers were Tlingit who came from the northern winter village of Tuxekan. They used it as a fishing camp for the summer period, and called it by several different names: Klawerak, Tlevak, Clevak, and Klawak. The name "Klawock" is derived from the Tlingit name ɬawa:k, a subgroup of the Tlingit nation. In 1853 a Russian navigator referred to the village as "Klyakkhan", and in 1855 as "Thlewakh".

In 1868, European Americans opened a trading post and a salmon saltery; some years later, in 1878, a San Francisco firm opened the first cannery in Alaska. In the following decades, several others were established. A United States post office was established in 1882. The 1890 census recorded the town's population as 260.

The Alaska Native Brotherhood (ANB) and Alaska Native Sisterhood (ANS), nonprofit organizations working for civil rights of Alaska Natives, were established by residents in 1912. Its founders and many volunteers built the Town Hall and a community center in 1939, during the Great Depression.

In 1929 the town incorporated as a city, and in 1934 Congress awarded federal funding for the expansion of the cannery, on the condition that the community remain liquor-free. At the same time, the Klawock Cooperative Association (a nonprofit organization) was formed to manage the cannery.

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