Tallassee is a city on the Tallapoosa River. The historic Creek peoples in this area are believed to have descended from the Mississippian culture, which flourished throughout the Mississippi and Ohio river valleys and the Southeast from about 1000 to 1450. They were mound builders, who created massive earthwork mounds as structures for political and religious purposes. They relied greatly on fishing and riverway trading at their major sites (c.f. Moundville, Tuscaloosa). Some historians and archeologists postulate that in the late 18th and early 19th centuries, this verdant area had the second-largest permanent American Indian settlement in North America.

Talisi was a town of the Coosa Province of the Mississippian culture; it was visited in 1540 by Hernando de Soto and his expedition through the Southeast. Later it was occupied by the historic Creek people. The Tallassee area was the location of the last great Creek capital city,Tuckabatchee, as well as the Great Council Tree. The ancient sacred tree was destroyed by a high wind in 1929.

In 1811 the Shawnee chief Tecumseh came to the South to urge the Creek and Choctaw to join his Great Confederation to repel European Americans from Indian lands west of the Appalachian Mountains. Local prophets took up his spiritual call, and the Creek split into two factions, roughly conforming to their settlement patterns: the Red Sticks, mostly from the Upper Towns, which comprised the majority of population, opposed the settlement of their land by whites. The younger men worked to revive traditional cultural and religious practices. The White Sticks, mostly from the Lower Towns, sided with the United States government, as they had a closer relationship with the US Indian Agent, Benjamin Hawkins, and were more affected by American settlement in their lands.

Their tensions first broke out as a civil war among the Creek, but US forces also got involved. Trying to intercept a Red Sticks party who were bringing back arms purchased from the Spanish in Florida, United States Army forces attacked the Creek at the Battle of Burnt Corn. The Creek band ultimately defeated the soldiers. In retaliation, the next month the Red Sticks attacked Fort Mims, about 35 miles north of Mobile, Alabama, killing most of the more than 500 settlers and mixed-race Lower Creek who had taken refuge there.

Osceola is believed to have been born in Talisi, to a mixed-race Creek mother and an English father. He was among those Creek who migrated to Florida after the Creek War and joined the Seminole Indians. He became a prominent leader who continued resistance to US forces and settlement.

The Creek Wars (1813–1814) were marked by mutual raids, civilian massacres, and scalpings by both sides. The last major battle was at Horseshoe Bend in 1814 on the banks of the Tallapoosa River. Led by then-General Andrew Jackson, a coalition of militia from Alabama, Tennessee and Georgia, federal troops, White Stick Creek, and the traditional rival Cherokee crushed the outnumbered and out-gunned Red Sticks. Jackson counted the conflict as among his politically strategic victories; it increased his popularity for later election to the presidency and his future policies of Indian removal.

After their defeat, many Creek migrated to Indian Territory, while some went into hiding with other resistant Indians in the Southeast, including the Cherokee, and the Seminole and Osceola tribes in Florida. The Creek who relocated from the Tuckabatchee area named a new settlement Talisia in Indian Territory. It was later known as Tulsa, Oklahoma.

In June 1864 the Confederate army moved the Richmond Carbine Factory from Virginia to an old Tallassee cotton mill. It began manufacturing the carbines. During the course of the American Civil War, the town of Tallassee was never attacked by Union forces, except for their one attempt to destroy the Tallassee Mill. The Tallassee Armory was the only Confederate one not destroyed during the war.

Early in the morning of November 30, 2009, the historic Hotel Talisi was heavily damaged by a fire. The hotel, closed since 2008 because of the fire, was purchased by a group of seven investors in the fall of 2009. It was renovated and had been reopened for a month. The fire destroyed the hotel and a consignment shop next door.

The fire was ruled an arson and a 17-year-old, Dylan Keith Carroll, pleaded guilty to one count second-degree arson, one count of third-degree arson, two counts of third-degree burglary, and three counts of first-degree criminal mischief.

After the trial, the hotel's owners met in March 2010 and decided to rebuild the structure. The hotel has not yet reopened.

The Tallassee City School System operates three schools (Tallassee High School, Southside Middle School, and Tallassee Elementary School). The school system serves about 2,000 students; the majority of families living in the city of Tallassee attend Tallassee City Schools.