Kuala Dungun town used to be an iron mining town in the 1940s. Iron ores were actually mined in a small town inland called Bukit Besi located to the west, while Kuala Dungun served as the port where the ore was transferred onto ships. Kuala Dungun and Bukit Besi were then connected with a railway line that not only served the mining industry but also served as public transportation for inland villagers, the Dungun township and its businesses.
This "golden" era ended in the late 70s and early 80s. When the mines were gradually closed down, the rail service stopped and the company left the area. Bukit Besi is now a Government-financed plantation estate; the rolling hills and old British architecture are now long gone, replaced by Felda Estate housing and palm oil trees. Kuala Dungun is now just another town on the coast of Terengganu, sorely bereft of cultural activities, with no cinemas, and only comes alive every Thursday when the weekly night market opens up for business. It is well known as the biggest night market in Terengganu and features second-hand clothing (imported from Japan and the United States) and also food of all sorts. People from the outskirts flow into town for the cheap goods. The night market is situated right in the middle of town, taking over a portion of the old railway line.
Nowadays, it is not a busy small town anymore. There are still pockets of fishing and farming families and some people involved in small businesses, while a large part of the population are involved with the petroleum industry concentrated in another township to the south, Kerteh.
Tanjung Jara Resort with its beautiful stretch of beaches, situated on the other side of the river mouth is still popular with foreigners and West Coast tourists. For those who look for eco-tourism spot, D'Pengkalan Eco Resort offer 3 natures spot at cool location in Dungun district.
Dungun was the recreational place for British employees of the mining company of the day. It was where they relaxed and pursued extracurricular activities. There were music halls, record stores, cricket fields, etc., that made Dungun different from other townships in Terengganu at the time. The locals were somehow influenced by this, especially by the 60s and 70s pop music brought in by the stores to cater for the British. The late 70s were known as the time when there were a lot of local musicians and bands active in the small township. One of the bands was Purple Haze, a psychedelic hard rock band in which Malaysia's well-known music composer Manan Ngah was a member. The first Malaysian punk rock scene was started here in 1978/79 by Joe Kidd and his friends.
As of 2006, Dungun is experiencing an uplift. To keep money in the district, Dungun has received an influx of funds that has gone to the improvement of roads and establishment of several new shopping areas.