A post office was established in 1887, though a similarly-named Carnesville required a change of names. "Dundee" was selected from a list. Dundee was incorporated in 1920 by Gubernatorial (Governor's) Proclamation.
Dundee served as a transportation hub, and a railroad depot was built around 1895. Blues musician W. C. Handy once played on the depot's wooden platform as crowds danced. In 2011, the depot—the last in Tunica County—was moved to Robinsonville, where it was restored and made into a visitors center. The "Highway 61 North" Mississippi Blues Trail marker is located in front of the depot.