Aberdyfi is the subject of a popular Welsh folk song, Clychau Aberdyfi / The Bells of Aberdyfi. The song refers to the ledgend of Cantre'r Gwaelod, a submerged kingdom beneath Cardigan Bay. The bells in the song, are those of that submerged kingdom that can be heard ringing beneath the water. The words were written by John Ceiriog Hughes in the 19th century, though the composer is unknown.
The same story inspired a novel during the Victorian era by Thomas Love Peacock, entitled The Misfortunes of Elphin (1829). Cantre'r Gwaelod also plays a major role in 'Silver on the Tree', the last book in Susan Cooper's series 'The Dark is Rising', parts of which are set in Aberdyfi.
In the 1800s, Aberdyfi was at its peak as a port. Major exports were slate and oak bark. Ship building was based in seven shipyards in Penhelig where 45 sailing ships were built between 1840 and 1880.
The railway came to Aberdyfi in 1863 built by the Aberystwyth and Welsh Coast Railway. The first train was ferried across the River Dyfi, as the line to Dovey Junction and then Machynlleth was not completed until 1867. Due to public demand, this section had to use a long tunnel behind Aberdyfi, and further major earthworks and tunnels were needed along the bank of the river. This line, which became part of the Cambrian Railways, and later the Great Western Railway, is particularly scenic.
A jetty was built in 1887, with railway lines connecting it with the wharf and the main line. The Aberdyfi & Waterford Steamship Company imported livestock from Ireland which were then taken further by the railway. Coal, limestone and timber were also imported.