Yankeetown was founded in 1923 by Armanis F. Knotts, a lawyer and politician from Indiana. Knotts was a major player in the founding of Gary, Indiana and the establishment of the US Steel mill in that city. When he retired, he came to the Yankeetown area because of the great hunting opportunities. In 1975, Knotts' nephew, Eugene Knotts, opened the AF Knotts Library in Yankeetown in honor of his uncle.

In 1961, Elvis Presley came to the Yankeetown area to film "Follow That Dream." He spent most of July and August that year between Yankeetown and Inglis.

Yankeetown is stretched out along the northern banks of the Withlacoochee River and offers excellent access to the Gulf of Mexico. The Gulf Hammock Wildlife Management Area is just north of town.

Between 2000 and 2010, the population of Yankeetown fell more than 20%.