The town was established in 1967 to support the nearby United States Naval Communication Station Harold E. Holt. Beginning in the late 1970s, the town began hosting U.S. Air Force personnel assigned to Learmonth Solar Observatory, a defence science facility jointly operated with Australia's Ionospheric Prediction Service.
The location was first used as a military base in World War II. US Admiral James F. Calvert in his memoir, Silent Running: My Years on a World War II Attack Submarine, and US Vice Admiral Charles A. Lockwood in Sink 'Em All, his narrative of Allied submarine warfare, describe its history. After the retreat from Java in March 1942, Allied naval forces had need of a forward base for replenishing submarines, then the sole form of offensive warfare against the Japanese. Both Darwin, Northern Territory, and Broome, Western Australia, were too exposed to air attack, so a 500-ton unmotorized lighter was placed as a refueling barge near the mouth of Exmouth Gulf, where the Allies were already maintaining a seaplane tender.
Code-named Potshot, the spartan base was also developed as an advanced base and rest camp for submariners using the tender USS Pelias. An airfield (now RAAF Learmonth) was constructed to provide fighter defense for the base. Z Special Unit used Potshot as a staging base for Operation Jaywick in September 1943.
Nowadays the town relies more on tourism than the station for its existence. At the 2011 census, Exmouth had a population of 2,207. At the height of the tourist season the population swells to 6,000.
Exmouth is one of the few areas in Australia that can boast the "Range to Reef" experience. The Cape Range National Park which has some spectacular gorges is an area of 506 square kilometres and its main area is focused on the west coast of the Cape which provides a large variety of camp sites on the coastal fringe of the Park.
On 22 March 1999, Tropical Cyclone Vance reached category 5 status as it made landfall near Exmouth. This resulted in the highest ever wind gust reported on the Australian mainland of 267 km/h at Learmonth, only 35 km to the south.
Vance caused significant flooding and property damage but there were no deaths.
In April 2014, Exmouth was hit by a massive flash flood, nearly destroying the caravan park and seriously damaging much of the town's infrastructure, causing a severe blow to tourism in the region.
Exmouth has a hot semi-arid climate. Temperatures often reach over 40 °C in summer, however winters are mild and pleasant with daytime temperatures around 25 °C. There is no specific wet and dry season in Exmouth, although rain is most likely to fall between January and July, usually with monsoonal showers and storms from January to April and from the northern edges of cold fronts in May, June and July. The period from August to December is usually dry.
See article: Exmouth Gulf