As part of the French settlement of the Gulf Coast, the bayou was originally called "Riviere D'Erbane" and acquired the present name from the French-maintained battery of artillery on the west bank ("bayou of the battery"). Bayou La Batre was the first permanent settlement on the south Mobile County mainland and was founded in 1786, when Joseph Bouzage (Bosarge) [1733-95] moved into the area and was awarded a 1,259-acre (509 ha) Spanish land grant on the bayou's west bank.
Born in Poitiers, France, Joseph Bouzage came to the Gulf Coast circa 1760, married Catherine Louise Baudreau (Boudreau) on June 5, 1762, and was the father of seven children, including one son, Jean Baptiste.
On August 29, 2005, the area was devastated by Hurricane Katrina, with a local storm surge of nearly 16-foot (5 m) and higher waves that engulfed Bayou La Batre and pushed over 23 shrimp boats and the cargo ship M/V Caribbean Clipper onto shore. The captain rode out Katrina on the 179-foot (55 m) cargo ship, owned by Caribbean Shipping Inc., and the ship was returned to sea six months later, using a large crane.
On September 7, the Hurricane Katrina Update for libraries affected by the storm indicated that the Bayou La Batre Public Library (then known as Mose Hudson Tapia Public Library) had been destroyed.