Hedeby — Heiðabýr in Old Norse, Haithabu in German — sat at the head of the Schlei, a narrow inlet reaching in from the Baltic near the southern end of the Jutland peninsula. The position was worth a fortune. From the Schlei it is less than fifteen kilometres overland to the Treene, which runs into the Eider and out to the North Sea, and goods and even vessels could be hauled across on a corduroy road. A merchant who paid for that portage skipped the long, dangerous voyage around the top of Jutland. Hedeby sold the shortcut, and straddled the north–south route between the Frankish empire and Scandinavia besides.

Frankish chronicles put Charlemagne here in 804. Four years later the Danish king Godfred destroyed Reric, a rival Slavic trading centre, and moved its merchants to Hedeby — a forced transplant that supplied the town's first real growth. Godfred also strengthened the Danevirke, the earthwork barrier across the peninsula, and tied it into Hedeby's own defences, so that the town's walls became a segment of a wall across Denmark. A semicircular rampart eventually rose about nine metres high on the landward side, enclosing twenty-six hectares. At the tenth-century peak, at least 1,500 people lived inside it.

Excavation has produced more than 340,000 fragments connected with comb-making alone, plus leatherworkers' tools, iron slag, goldsmiths' waste and the mercury used for fire-gilding. A glass furnace ran here between roughly 850 and 900. Some 7,700 beads have come out of the ground — carnelian, rock crystal, amber, jet, silver, brass, bronze, mosaic glass — and their styles turn over every ten to thirty-five years, which is to say that Hedeby had fashion. It had ranks too: a few graves furnished with jewellery, weapons and armour stand out sharply against the plain burials around them.

The town also trafficked in people. Men, women and children seized in raids across eastern Europe passed through Hedeby and ports like it, sold onward along the Volga route toward Central Asia and the Abbasid Caliphate in exchange for Arab silver and silk. The dirhams that keep surfacing in Scandinavian soil are the receipts. Whatever else this town's wealth rested on, part of it rested on that.

In 1908 the archaeologist Friedrich Knorr opened something no one had seen before and no one has seen since. Beneath the ground lay a timber burial chamber, 3.7 by 2.4 metres, holding three men of obvious standing. Above it, laid horizontally across the roof rather than wrapped around the bodies, sat a ship roughly sixteen metres long. The western half of the chamber held the richer goods: bronze vessels, glass beakers, swords, shields, silver filigree, harness fittings. In the eastern half were an iron-bound wooden bucket, more weapons, more bridle parts, and three horses lay in a shallow pit alongside. The objects point to the end of the ninth century or the start of the tenth. Who the three men were — and why anyone roofed a grave with a ship instead of burying the dead inside one — is still open.

In 1050 Harald Hardrada of Norway sacked Hedeby during his war with Sweyn II of Denmark, sending burning ships into the harbour; their charred remains were still on the bottom of the Schlei when archaeologists went looking. A skald in Harald's army left the boast intact: "All Hedeby was burned from end to end… high flame burst from the houses." West Slavic raiders came in 1066 and finished it. The survivors crossed the water and built Schleswig, and Hedeby was left to silt, flood and grass until nobody could say where it had stood. That amnesia was a gift: nothing was ever built on top of the town, and the waterlogged ground held onto wood, leather and rope that would have rotted anywhere else.

Sophus Müller pinned down the location again in 1897; Johanna Mestorf began digging in 1900, and the early campaigns sank more than 350 trenches. The 1930s brought the SS's Ahnenerbe under Herbert Jankuhn, whose finds were never published in proper detail. Divers located the longship known as Hedeby 1 in 1953 and raised it in 1979. A metal-detector survey in 2003 logged 11,500 finds. Even so, only about five per cent of the settlement and one per cent of the harbour has been examined. The Viking Museum opened next to the site in 1985, and between 2005 and 2008 seven houses were rebuilt from the excavation evidence and set back on the original ground. In 2018 Hedeby and the Danevirke were inscribed together on the UNESCO World Heritage List — the town and the wall it grew into, finally counted as one thing.