The peak of human settlement on Assateague reached 225 individuals around 1900. During the 1920's, one man, Samuel Fields, owned much of Assateague, Virginia, and would not allow others in the community access to the seafood beds of Tom's Cove. The residents simply floated their homes across the bay on barges and set up residence across the waster on the island of Chincoteague. Pony penning also became difficult, with so much of the land privately owned. The locals established a single penning for both islands, held on Chincoteague. Initially, the ponies were ferried across from Assateague by boat, but in 1925 they were swum across the channel, as is done today.

Chincoteague was an isolated island, cut off from the mainland, with schools, a post office, and many homes, mostly made of wood. The streets were narrow, and the houses were closely built. The people of Chincoteague feared fire, because they knew that it could quickly wipe out their entire community. When a building was destroyed by fire early in the 1900's, people realized that they needed to purchase fire fighting equipment and train a team how to use it. They bought a hand pump engine, and later a gasoline engine. But when a serious fire struck fifteen years later, the town's people found that nobody had properly maintained the equipment, and it wouldn't work properly. Twelve homes and businesses were lost. Four years later, another fire took most of the buildings on the west side. The Chincoteague residents vowed that this preventable tragedy would never recur. In may, 1924, the Chincoteague Volunteer Fire Department was born. To raise money for fire equipment, the annual fireman's carnival was organized, which included the round up and auction of the Assateague ponies.

Tens of thousand of visitors pack the island every July to witness this event. Riders on horseback herd the animals into a fenced area on Assateague to await slack tide. When the water currents are calm, the entire herd is driven across the channel as excited spectators watch. After swimming the channel, the ponies are allowed to rest, then are driven down the street to another set of holding pens. The fire department auctions the spring foals and a few yearlings, but foals younger than three months are allowed to remain with their mothers on Assateague until fall. In 1994, foals sold for $400 to $2,200, and every year brings higher bids. In 1994, a registry was established for Chincoteague ponies.

In 1947, Marguerite Henry published the best-selling book, Misty of Chincoteague, which became a successful movie in 1961. This fictionalized account of the Assateague ponies and the adventures of two Chincoteague children remains popular today and contributes to tourist traffic to Chincoteague.

Misty was a real pony, born on the BeeBee ranch and not on Assateague, like the Misty in the book. Marguerite Henry fell in love with the week-old Misty while visiting Chincoteague, and bought her. Paul and Maureen BeeBee, who inspired the characters by the same name in the book, halter broke and gentled the pony during her stay on the BeeBee ranch. When Misty was weaned, she had her shipped out to her home in Illinois, to provide inspiration while she wrote her famous story. While the story line of Misty is not factual, the setting is true to life, and depicts a fairly accurate portrayal of pony penning around the 1950's.

The ponies live the rest of the year roaming the Chincoteague Wildlife refuge on Assateague Island. The ponies are abundant and not at all shy of visitors, and are easily viewed from an observation platform or fences along the roadside.