The museum opened in 1996, organized by the leaders of Chapel Hill's Bicentennial Committee. The town was marking 200 years since the auction of its first village lots in 1793, an auction that established the future home of UNC, the first public university in the country. The committee wanted a place to tell that long story. The building they chose had its own provenance: architect Don Stewart had designed it as the Chapel Hill Public Library, dedicated in 1968. When the library moved to Estes Drive, the contemporary structure with its characteristic stonework and lush vegetation became home first to the Chapel Hill Historical Society, then to the new museum. The upstairs held two galleries, a gift shop, and a kitchen. The lower level housed the archives.

The signature permanent exhibit was titled Meet Me on Franklin Street, named for the road that runs through the heart of Chapel Hill. Visitors walked through a recreated 1940s streetscape built from Bayard Wooten's photographs and watched the same blocks shift forward through time, all the way to the 2005 celebration of UNC's basketball championship that filled the same Franklin Street with thousands of students. Wooten had been an early 20th-century woman photographer working when her field was almost entirely male. Her images of Chapel Hill gave the museum its visual spine. A separate exhibit chronicled the life of Paul Green, the playwright who invented the symphonic outdoor drama and won a Pulitzer in 1927. Green taught Drama and Philosophy at UNC and championed civil rights for decades.

Some of the museum's most quietly important work was the Lincoln High exhibit. Lincoln was the only all-Black high school in the town before desegregation, operating from 1951 until it closed in 1966. The exhibit was a visual documentary of the academic, athletic, and artistic life of the students who attended, with portraits taken by area photographer Bob Gilgor. The Robert Ruark show ran in 2006, documenting a Chapel Hill native journalist often called a poor man's Hemingway. The Town Treasures exhibit, in collaboration with the Chapel Hill Historical Society, recognized residents for decades of extraordinary service. The museum's choices about what to remember made it more than a collection. It made it an argument.

The Education Committee was the soul of the operation. Volunteer educators ran free programs for the Chapel Hill-Carrboro school district, homeschool collectives, and public and private schools across Orange, Chatham, and Durham counties. More than 3,500 children went through their programs each year. The flagship was Fire Safety and Puppet Musical, a three-part show built around the museum's original 1914 fire truck. Students watched a musical puppet show called Johnnie Joins the Fire Department about home escape plans, then met an actual firefighter in full turnout gear so they would not hide from one in a real emergency. The program won an honorable mention in the International Association of Fire Fighters 2008 Media Awards. The committee itself won the North Carolina Governor's Award for Outstanding Volunteer Service in 2005.

The museum closed on July 11, 2010, fourteen years after it opened. The collection scattered. The building at 523 East Franklin remained, a contemporary structure with stonework and vegetation that had now housed three civic institutions across half a century. James Taylor's Hall of Fame trophy moved on. The 1914 fire truck found another retirement. The puppets that taught second-graders to make home escape plans, the Wooten photographs of Franklin Street, the 280 pieces of Southern pottery donated by Dr. Everett James and Dr. Nancy Farmer, all went to other places. The museum had been built around the conviction that a small town's history was worth telling at the scale of a small town. For fourteen years, in two upstairs galleries on Franklin Street, it told that history.