Located on the Isle of St. James, Carrabelle is surrounded by bays, rivers, and sounds. Also, there is a barrier island to Carrabelle's south named Dog Island. Dog Island, is only accessible by boat, ferry, or airplane. The majority of Dog Island is owned by the Nature Conservancy, but some portions are privately owned residential property.
There seems to be some dispute over how the city of Carrabelle was named. The first Post Office listed the town as "Rio Carrabella," supposedly meaning "Beautiful River." However, others say it was named after the two beautiful daughters of the town's founder: Carrie and Belle.
After the Civil War, Carrabelle began to boom. In 1875, the first lumber mill was shipping in and out to the North. In 1893, many lumber and saw mills were situated on the Carrabelle River. The downtown area was established around one of these large mills known as the Coombs Mill, near the mouth of the River. A railroad station not only carried salted down mullet and other goods north, but brought tourists down from Tallahassee and surrounding areas.
A disastrous hurricane destroyed the town square at the turn of the 20th century. Downtown Carrabelle was then relocated to it's present location, with many of the town's buildings being built in the early 1900s.
Unfortunately, in the span between World War I and World War II, Carrabelle was in an economic slump. No longer was lumber and turpentine king. Fishing became the principle industry. With the onset of World War II a training camp was built at Lanark Village, which gave much needed work to Carrabelle residents.
After World War II, Carrabelle's main industry was shrimping.