The town is located in the Iowa River Valley and has suffered severe damage in several floods. A post office was established in Chelsea in 1862. Chelsea was laid out in 1863, and it was incorporated in 1878.
Less than a mile east of where the present Chelsea is located, Otter Creek Station once existed. By the end of 1861, the Chicago, Iowa, and Nebraska Railroad, later known as the Chicago and Northwestern, had extended westward that far into Iowa. When Otter Creek Station was moved about three-quarters of a mile west to the present location of Chelsea, and the railroad extended westward, the name was changed. One story has it that S.G. Breese, one of the original owners of land near the site, named it for Chelsea, MA, from where he had emigrated. Another is that John I. Blair named it for Chelsea, England.
In the history of Chelsea, floods have often played havoc with the town and its environs but its citizens return and carry on the tradition of hardiness.
Chelsea lies along the original Lincoln Highway route which was America’s first “coast-to-coast” highway. The original steel bridge on the Lincoln Highway in Chelsea was replaced in 1928-29 with the Otter Creek Bridge, which in turn had to be replaced in 2007. Citizens of Chelsea encouraged the preservation of the lamp posts which graced the old bridge railings. That action brought high accolades from the National Lincoln Highway Association.