The Civil War had a dramatic effect on Beaufort, as an amphibious attack and subsequent occupation of the city in November 1861 made it one of the first communities in the Deep South to be held in Union hands. Though much of the town was spared from physical destruction, there were many incidents of arson and looting. In a historic effort that pre-dated American Reconstruction, the Port Royal Experiment provided a test case for the education of freedmen. In addition to educational advancements, the city made some political ones as well. Robert Smalls, a native son and leading figure in post-war Beaufort would later become one of South Carolina's first elected African-Americans to the United States Congress and remained a prominent civic leader in the state and in Beaufort until his death in 1915. Due in part to the large African-American population and also Small's leading role, Beaufort remained one of the last outposts of Republican Party power in the Solid South.
Some of Beaufort's most prominent families returned to the area but never regained the enormous wealth that slave-based agriculture provided. Most of the original antebellum power brokers never returned to the area. As the influence of cotton declined, the lure of aqua phosphate mining increased. By 1890, Beaufort had regained some of its wealth and prosperity from that industry. It had also retained its position as county seat during that time, having previously lost it to railroad community of Coosawhatchie. However, a series of events would bring Beaufort into a steady economic decline for over half-century.