In World War II, the toughness of warships launched by Maine workers gave rise to the saying "Bath-built is best-built."
By 1882, Hyde Windlass was expanding with an eye to entering the new and growing business of iron shipbuilding, and on February 28, 1890 the recently-incorporated Bath Iron Works won its first contract for complete vessels, two iron gunboats for the U.S. Navy. The , one of these 190-foot gunboats, was the first ship actually launched by the company. (Historian Snow (see "Further Reading") says the gunboat was commanded during World War I by Chester Nimitz, an assertion that is not supported by Nimitz's biographers.)
In 1892, the yard won its first commercial contract for a steel vessel, the 2,500-ton steel passenger steamer City of Lowell. In the 1890s, the company built several yachts for wealthy sailors.
In 1899, General Hyde, suffering from the Bright's Disease that would kill him later that year, resigned from management of the shipyard, leaving his sons Edward and John in charge. That year the shipyard began construction of the , the only battleship to be built in Bath. The ship dominated the yard for five years until its launching in 1904, and was at times the only ship under construction. The yard faced numerous challenges because of the weight of armor and weapons. In sea trials, the Georgia averaged 19.26 knots (35.67 km/h) for four hours, making her the fastest ship in her class and the fastest battleship in the Navy.
The company continued to rely on Navy contracts, which provided 86% of the value of new contracts between 1905 and 1917. The yard also produced fishing trawlers, freighters, and yachts throughout the first half of the century.
At peak production during World War II (1943–1944), the shipyard launched a destroyer every 17 days.
In 1988, the , commissioned two years earlier at Bath, survived a mine explosion that tore a hole in its engine room and flooded two compartments. Over the next two years, BIW repaired the Roberts in unique fashion. The guided missile frigate was towed to the company's dry dock in Portland, Maine, and put up on blocks, where its damaged engine room was cut out of the ship. Meanwhile, workers in Bath built a 315-ton replacement. When it was ready, the module was floated south to Portland, placed on the dry dock, slid into place under the Roberts, jacked up, and welded into place. By surviving a hit that Naval Sea Systems Command engineers thought should have sunk her, the Roberts validated the penny-pinching design of the , the U.S. Navy's largest post-WWII class until the Burkes — and validated the Navy's against-the-odds decision to have picked BIW to design it.
In 2001, BIW wrapped up a four-year effort to build an enormous concrete platform, the Land Level Transfer Facility, for final assembly of its ships. Instead of being built on a sloping way so that they could slide into the Kennebec at launch, hulls were henceforth moved by rail from the platform horizontally onto a moveable dry dock. This greatly reduced the work involved in building and launching the ships.