Charlestown is most probably called after Charles Smith, manager of the Waratah Coal Company. This company's first shaft was known as Charles' Pit. The early days saw mines develop in the area and the town had various names – Raspberry Gully, The Gully Pit and South Waratah – before it was named Charlestown. Coal was mined until the end of World War II.

The subdivision which formed Ida, Pearson, Milson and Frederick Streets was surveyed on 29 April 1876. This was probably the earliest subdivision of the Charlestown area. The Waratah Coal Co. held a land auction in 1876 and the first lot was sold to Mr. Harry Wright.

Charlestown was at first included in the Municipality of Waratah. In 1877 it had thirty to forty houses. By 1879 it had a Post Office, 3 hotels, a School of Arts and several stores. By 1883 it had a Mechanics Institute and two churches. The Government Savings Bank opened in 1879. The towns-people advertised for a doctor in 1885. The first picture theatre was the Renown, built by Mrs Nelson in 1928.

Charlestown Square which was the first shopping centre in the Hunter was opened in 1979 and is currently being redeveloped into the Hunter region's largest shopping centre.

Pacific Highway and Frederick Street Corner

The RTA Charlestown Vehicle Regulation Unit was the most prominent tenant on this location. Following the RTA, Baker Love Solicitors occupied the site prior to the 2007 development of the $7.6million environmentally sensitive new commercial building by Jackson Teece architects. The building was the 2009 joint winner of the Landcom Lower Hunter Urban Design Award for Excellence in Urban Design (Commercial/Industrial). Allianz took over the middle two floors in early 2009, with Cscan completing a $7 million dollar fit-out and taking residence within the ground and top floors in December 2009.