Manchester-by-the-Sea was first settled in 1629 and was officially incorporated in 1645.
The community thrived as a fishing community until 1845, when Richard Dana, a Boston based poet, built his summer house in the community. Over the next fifty years, development of summer houses along the coast line established the community as Boston society's community of choice for summer residency. The trend continued with designs by other notable architects, such as Sunnywaters, designed by John Hubbard Sturgis for his older brother, Russell, in 1862. The most famous of these "summer cottages" was Kragsyde, built on Smith's Point in 1883 and demolished in 1929. Commissioned by George Nixon Black, the Peabody and Stearns designed residence has been hailed as the zenith of the Shingle style substyle of the Queen Anne style of architecture.
The community is served by Manchester Harbor.
As of the census of 2000, there were 5,228 people, 2,168 households, and 1,435 families residing in the town. The population density was 562.7 people per square mile (217.3/km²). There were 2,327 housing units at an average density of 250.5/sq mi (96.7/km²). The racial makeup of the town was 98.87% White, 0.06% African American, 0.17% Native American, 0.38% Asian, 0.11% from other races, and 0.40% from two or more races. Hispanic or Latino of any race were 0.77% of the population.
There were 2,168 households out of which 29.6% had children under the age of 18 living with them, 55.7% were married couples living together, 8.1% had a female householder with no husband present, and 33.8% were non-families. 27.5% of all households were made up of individuals and 11.8% had someone living alone who was 65 years of age or older. The average household size was 2.40 and the average family size was 2.96.
In the town the population was spread out with 23.9% under the age of 18, 4.4% from 18 to 24, 24.0% from 25 to 44, 31.2% from 45 to 64, and 16.4% who were 65 years of age or older. The median age was 44 years. For every 100 females there were 89.4 males. For every 100 females age 18 and over, there were 86.8 males.
The median income for a household in the town was $73,467, and the median income for a family was $93,609. Males had a median income of $68,466 versus $37,981 for females. The per capita income for the town was $47,910. About 3.6% of families and 4.8% of the population were below the poverty line, including 1.9% of those under age 18 and 7.5% of those age 65 or over.