Sighetu Marmatiei is situated along the Tisa river on the border with Ukraine, across from the Ukrainian town of Solotvyno.

The city's name derives from Hungarian name which means "island in Máramaros".

Inhabited since the Hallstatt period, the populated area lies in the Tisza Valley, an important route as being the only access to the otherwise mountainous, sparsely populated region. After 895 in the 10th century the area became part of Kingdom of Hungary. The first mention of a settlement dates back to the 11th century, and the city as such was first mentioned in 1326. In 1352, it was a free royal town and the capital of Máramaros comitatus, just outside Transylvania.

After the defeat at the Battle of Mohács and the death of Louis II of Hungary, in the ensuing struggle for the Hungarian throne, the kingdom was divided into Royal Hungary of Habsburg Ferdinand I, Holy Roman Emperor and the Eastern Hungarian Kingdom of John Zápolya the Voivode of Transylvania. In 1570 the Principality of Transylvania was formed which included Máramaros County. Transylvania, including Maramures, became an autonomous principality within the Ottoman Empire from 1541. In 1711, King Charles III returned Máramaros County to his Hungarian domain.

During the early centuries of the Kingdom of Hungary Vlachs and Rusyns were settled in the sparsely populated county and later a sizable Jewish community formed through immigration and the town became a center of cultural and political life of these communities. The Jewish community was led by the Teitelbaum family - a scion of which would later lead the present-day Satmar Hasidic community.

1918 saw the dissolution of the Austro-Hungarian Monarchy. On November 22, 1918, in an assembly of Romanians from Maramures took place in the town's central square, electing a national council and deciding to send a delegation to the Great National Assembly at Alba Iulia, which voted the union of Transylvania with Romania and the consequent establishment of Greater Romania. The Allied Powers accepted the Romanian demands and Transylvania including Máramaros County was formally ceded to Romania in the Treaty of Trianon in 1920.

In 1919, six Romanian schools opened in Sighet: a boys' high school, a girls' high school, a boys' elementary school, a co-ed commercial gymnasium, and two commercial high schools (one for boys, the other for girls). The Maramures ethnographic museum opened in the cultural palace in 1926. During the interwar period, over twenty newspapers appeared in the town, as well as a number of literary reviews. As a result of the August 1940 Second Vienna Award during World War II, it came under Hungarian administration during the war.

A first deportation of Jews from Sighet took place in 1942. The second occurred after Passover 1944, so that by April, the town's ghetto contained close to 13,000 Jews from Sighet itself and the neighboring places of Dragomiresti, Ocna Sugatag and Viseu de Sus. Between May 16 and 22, the ghetto was liquidated in four transports, its inhabitants sent to Auschwitz concentration camp. Among the deportees was Sighet native and future Nobel Peace Prize laureate Elie Wiesel. In 1947, there were some 2,300 Jews in Sighet, including survivors and a considerable number of Jews from other parts of Romania. By 2002, the town had 20 remaining Jews.

The Treaty of Paris at the end of World War II voided the Vienna Awards, and Sighetu Marmatiei, administered by Romania since October 1944, formally returned to the country in 1947.

In 1948, the new Communist regime nationalized the city's factories, three publishing houses and banks. In 1950, with the counties replaced by regions, Sighet lost its status as an administrative center. In 1960, the building of neighborhoods with apartment blocks began. The same year, the town's name became Sighetul Marmatiei; the final “l” was dropped in 1968. 1962 saw the opening of a wood processing factory (Combinatul de Industrializare a Lemnului). Turning out furniture and other wood products, it had over 6,000 employees and played an important part in the city's economic development. After the Romanian Revolution of 1989, it gradually fell upon hard times, with nine private firms employing some 3500 in 2012. A second important employer during the Communist period was a textile factory.

In May 2014 a commemoration was held in honour of the 70th anniversary of the deportations in May 1944. Events included a Klezmer concert, Sabbath services in the one remaining synagogue, a memorial service at the Holocaust Monument at the site of the deportations, as well as an exhibit on life in Sighet prior to the deportations. The exhibit contained contributions by survivors and their families. Additionally, visits were organized to the Jewish Cemetery as well as the Holocaust Museum located in the childhood home of Elie Wiesel. On 3 August 2018, Wiesel's birthplace was vandalized.