Mount Stewart is located at the head of the once-navigable portion of the Hillsborough River at the point where the river begins to narrow significantly.
The village played an important role in the province's early transportation history, being the site of a bridge over the river along the route between the capital at Charlottetown and the shire town of Kings County at Georgetown.
In the early 1872, the Prince Edward Island Railway ran its mainline between both communities through Mount Stewart. Mount Stewart also came to be referred to as Mount Stewart Junction after the PEIR built a line northeast to Morell and Souris. During the 1930s, the village became the centre of all railway service accessing eastern PEI after the Hillsborough River Bridge carrying the railway line to Murray Harbour between Charlottetown and Southport was condemned. The CNR constructed what was known as the "Short Line" between Mount Stewart and Lake Verde, permitting rail traffic to continue to serve the southeastern part of the province.