The first settlement at Klaksvík dates back to Viking times, but it was not until the 20th century that the district merged to form a large, modern Faroese town that became a cultural and commercial centre for the Northern Isles and the Faroe Islands as a whole.

Klaksvík is located between two inlets lying back to back. It has an important harbour with fishing industry and a modern fishing fleet. Originally, four farms were located where Klaksvík is now. In time, they grew into four villages: Vágur, Myrkjanoyri, Gerðar and Uppsalir; which finally merged to form the town of Klaksvík in 1938. What triggered the development of the town was the establishment of a centralized store for all the northern islands on the location.

The brewery Föroya Bjór in Klaksvík is a Faroese family brewery, founded in 1888. The ram has been the symbol of the brewery since the early beginning. Since August 2007, when Restorffs Bryggjarí went out of business, Föroya Bjór has been the only producer of beer and soft drinks in the Faroe Islands.

With the opening of the Leirvík sub-sea tunnel, the Norðoyatunnilin in April 2006, Klaksvík gained a physical link with the mainland of the Faroe Islands and can now be considered one of its key ports. Several developments are under way to exploit this symbiosis, including a new industrial park located by the tunnel entrance. Klaksvík is home to Summarfestivalurin.