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Mae Salong's early history centred on the opium trade of the Golden Triangle. Its recent history was shaped by the 93rd Division of the Chinese Nationalist Army that refused to surrender to Chinese communists after the Nationalist Kuomintang government was routed in 1949.

The soldiers that settled in Mae Salong kept it as a military base in preparation for an eventual counter-attack against communist China. They funded their arms purchases with opium production and rubbed shoulders with notorious Burmese warlord and drug baron Khun Sa, who lived a few kilometres away in Ban Hin Taek and who initially trained with the Kuomintang before founding his own army.

In the 1970s the Thai government struck a deal with the renegades: the battle-hardened soldiers would help them fight Thailand's own communist insurgents in exchange for legitimacy and Thai citizenship. Part of their going straight involved the soldiers' cessation of opium production in favour of the cultivation of mushrooms and above all oolong tea, which is now Mae Salong's main product.