Wasserburg (literally: a castle in the water) was originally founded in 784, at which time it lay on an island. It was part of the lands of the monastery of St Gallen. In 1384 it came within the power of the Counts of Montfort, who sold it in 1592 to the Fuggers. In 1720 the island became a peninsula when it was linked to the mainland by a causeway, some of whose sandstone columns still remain.
In 1755, the Fuggers gave up sovereignty over Wasserburg to the Habsburgs in settlement of some debts, so the town then formed part of Austria, under the governance of Tettnang. In 1806 Napoleon Bonaparte transferred its sovereignty to the kingdom of Bavaria.
The Antoniuskapelle in the Selmnau district was first consecrated in 1492. Among its ornaments are a gothic Madonna and several baroque sculptures. The chapel stands on a glacial moraine and gives a broad view over Lake Constance.
Nowadays Wasserburg's economy is based mainly on tourism and the cultivation of fruit. The municipality possesses two beach swimming pools, a boat hire facility, and a sailing school. Numerous hotels, boarding houses and bed and breakfast establishments offer a total of over 1,700 tourist beds. The local fishing industry supplies the town's restaurants with fresh fish from Lake Constance, especially whitefish.