This 18th century city remains is situated at the mouth of Sungai Muda, in the south of Kedah. In its heyday, the city was an important trading post in Asia. Goods traded here included silver and spices that attracted traders from China, India, Portugal, Netherlands and England. The city progressed rapidly in 1786 with the opening of Penang as a trading hub. Commodities such as silver brought through were levied taxes as more ships plying its waters. 

In 1804, the development of trade in the city attracted the attention of Kedah’s Sultan, Sultan Ahmad Tajuddin Halim Shah in Alor Setar who subsequently moved his palace to Kuala Muda at Pulau Tiga. His presence in Kuala Muda help the city to flourish. In 1875, the city made history when Raja Ismail of Perak used it as a hideout to run away from the English after killing J.W.W Birch, the British Resident. Here, he remained hidden for six months before eventually surrendering to the authorities.