The trade did not grow here by accident. In 1647 a merchant brought lacemakers from Westphalia to Tønder to teach the craft, and it took hold in a place that badly needed something to sell. Tønder lace is bobbin lace of the point-ground type, painstaking work done at a pillow with dozens of threads in play at once, and for a century and a half it was the region's cash crop. Peak employment came around 1801. Machine-made lace arrived in the late nineteenth century and the economics collapsed almost immediately — no hand can compete with a loom on price. The craft never actually died, though. It is still worked in Tønder today, mostly by hobbyists, and the town produced its own authority on it: Hansigne Lorenzen, writer and lace expert, born in 1870 and buried in 1952.

Tønder is Denmark's oldest privileged market town, granted Lübeck market rights in 1243, and for three centuries it was a port. The sea reminded the town of the arrangement in 1532, when a storm surge pushed water 1.8 metres deep into the church — 5.3 metres above normal level. The dykes that followed solved the flooding and destroyed the trade. Built west of town in the 1550s at the direction of Duke Hans the Elder of Schleswig-Holstein-Haderslev, son of Frederick I of Denmark, they cut Tønder's harbour off from open water for good. A market town stranded inland has to find another product, which is roughly when the lacemakers turned up. Kristkirken, the town's main church, dates from around 1592, built in the middle of that reinvention.

The Imperial German Navy put an airship base at Tønder during the First World War, and on 19 July 1918 the Royal Navy came for it. Seven Sopwith Camels launched from the carrier HMS Furious; one turned back with engine trouble and six pressed on. They hit two of the three airship hangars, destroying the Zeppelins L 54 and L 60 inside one and a captive balloon in the other. It was the first attack in history carried out by aircraft flown from an aircraft carrier — an entire century of naval aviation begins with six biplanes over a North Frisian marsh. One pilot was lost and presumed drowned; three landed in neutral Denmark and were interned. Tønder was finished as an active airship station after that. A wartime aircraft hangar and some ancillary buildings survive, but the great airship sheds are down to their foundations, and the site now holds the Zeppelin and Garrison Museum.

Before 1864 Tønder sat inside the Duchy of Schleswig, which is to say inside the most tangled sovereignty question in nineteenth-century Europe. When the Schleswig plebiscite came in 1920, Tønder's own voters were emphatic: 76.5 per cent chose Germany, 23.5 per cent chose Denmark. It made no difference. The vote was counted by zone rather than by town, and Zone I as a whole went strongly Danish, so Tønder became Danish along with it. The town did not simply convert. German parties held majorities on the town council for years afterwards, and Tønder was officially bilingual until 1945. Only after the German occupation of Denmark ended did German political influence fall away. The border remained an economic problem long after it stopped being a political one; sitting at the edge of a country is a poor position from which to build industry, and growth stayed slow through the late twentieth century.

What the border cost the factories it has partly returned in other ways. Because Tønder is the first Danish town north of Germany and Danish marriage law is far quicker than German — a week of formalities rather than three months' residence, fewer documents, and vows permitted in languages other than Danish — the town hall has been an elopement destination since the 1960s. In 2007 it married more than 2,500 non-resident couples against 150 local ones. Every August the Tønder Festival, running since 1974 on the last full weekend of the month, fills the town with folk, roots and blues; by 2006 it took some 1,900 volunteers to stage. The old water tower has held Museum Sønderjylland's Hans J. Wegner collection since August 1995 — thirty-six chairs the designer himself picked as his best work, shown in the town where he was born on 2 April 1914. Det Gamle Apotek puts on Scandinavia's largest Christmas exhibition. The town counted 7,477 residents at the start of 2025.