People have lived in the Newry valley for thousands of years. Three miles south of the modern city sits Clontygorra Court Cairn, where excavations turned up pot sherds, scrapers, a polished axe, and the cremated remains of a single ancient inhabitant. From the Bronze Age came the famously detailed Newry Clasps, garment fittings that are now held in the Ulster Museum, alongside a massive arm clasp from the same period found in the town itself. In AD 820, Vikings landed near here on their way north to sack Armagh. In 1157, the Cistercian abbey of Newry received its charter from Muirchertach Mac Lochlainn, High King of Ireland. Four centuries later Henry VIII's dissolution swept it away, and Sir Nicholas Bagenal built his castle on the abbey lands. The first Protestant church in Ireland, Saint Patrick's, went up here in 1578 on the same site.

Everything changed in 1742. The Newry Canal opened that year, twenty miles north to the Bann at Portadown and onward to Lough Neagh, the first true summit-level canal in Ireland or Great Britain. By 1769 a separate ship canal pushed three and a half miles further south to the deep water of Carlingford Lough. By 1777, Newry was ranked the fourth largest port in Ireland. Some of the warehouses that lined the canal in the 18th and 19th centuries still stand on Merchants Quay, now converted to apartments and shops. The city's most striking surviving piece of canal-era engineering is the Craigmore Viaduct just north of town: an eighteen-arch granite railway bridge designed by Sir John MacNeill and opened in 1852, with its highest arch at 126 feet. It remains the tallest viaduct in Ireland. The Belfast-Dublin Enterprise train crosses it daily.

Newry is one of only a handful of cities to straddle two counties. The Clanrye River runs through the centre; its western bank lies in County Armagh, its eastern in County Down. Newry Town Hall, built across the river itself, sits on the historic boundary between them. The Catholic Cathedral of Saints Patrick and Colman went up in 1829 in local granite, designed by Thomas Duff. There is a story about Duff and his other cathedral commission in Dundalk, the next town over the border: legend says he mixed up the plans and sent each cathedral's drawings to the wrong builders. Whether or not it is true, the two cathedrals are mirror images of each other, ten miles apart in two different jurisdictions. Newry became a cathedral city of the Catholic Diocese of Dromore long before it received its city status from the Crown.

When Ireland was partitioned in 1921, Newry ended up on the northern side of the new border, but with one of the largest Catholic majorities in Northern Ireland. Around eighty per cent of the population identified as Catholic or Irish nationalist, a proportion too large to gerrymander. From the 1920s through the 1960s, Newry Urban District Council was therefore one of the very few councils in the north with a nationalist majority. For a stretch in the 1940s it was actually controlled by the Irish Labour Party. The Troubles arrived in Newry as elsewhere, with bombings, killings, and military watchtowers on the hills above the town. The watchtowers came down in 2003. The British Army withdrew from its last base nearby, at Bessbrook, on 25 June 2007.

City status arrived in 2002 with the Golden Jubilee of Elizabeth II. Newry was one of two Northern Ireland towns elevated that year, alongside the largely Protestant Lisburn, in what was widely seen as a balanced gesture. Six years later, the world financial crisis tipped the euro against the pound, the Republic of Ireland raised its VAT, and the United Kingdom cut its own. Suddenly Newry, two miles from the border, became the cheapest shopping town in the European Union. In December 2008 The New York Times described it as exactly that, a place where consumers "armed with euros" enjoyed an average currency discount of around thirty per cent. Traffic queues on the approach roads from the south stretched for miles on weekends. Politicians in the Republic complained that the practice was unpatriotic. People kept driving north anyway. Locals still call it the Newry effect.

The city has produced a remarkable cluster of public figures: the goalkeeper Pat Jennings, the football manager Willie Maley, the GAA founder Michael Cusack, the filmmaker Tomm Moore of Cartoon Saloon, Pulitzer-winning poet Paul Muldoon, and the 19th-century Irish patriot John Mitchel. Stand on the bridge of the Town Hall today, with the Clanrye flowing beneath you and Armagh on one bank, Down on the other, and the old canal warehouses converted to restaurants below the cathedral's spire. The yew tree that gave the town its name is long gone. Whatever it stood for has not been.