The town was established in 1382, when a Bosnian ruler King Tvrtko I Kotromanić established it in Topaljski Bay, with the intention of building the town with trade, maritime and crafts activities. He called it Sveti Stefan. As the youngest town on the Adriatic Sea it was called Castrum Novum and Castel Nuovo. It got its current name during the rule of Herzeg Stjepan Vukčić Kosača during when it developed and flourished.