The 20th century brought improvements to energy and domestic systems: electrical service was introduced in 1915; and in 1941, just before World War II, the town installed a water system.
The construction of Interstate 81 (I-81) during the early 1960s depressed business development in the town.
The wagon road, which had been made part of U.S. Route 11, had led traffic through the center of town, but the interstate passed less than a tenth of a mile to the east, drawing off development, retail trade and ultimately, businesses.
This caused downtown to decline.
Developers constructed new residential subdivisions both within and outside the town boundaries to the east for access to I-81.

The town surveyed its older buildings to establish architectural significance and to determine those that contributed to the town's historic center.
The Newtown–Stephensburg Historic District was listed on the National Register of Historic Places in August 1992.
Renovation of the town center has attracted heritage tourism.
Anticipating more growth, the town annexed 360 acres (1.5 km²) of unincorporated Frederick County in 2005, another 100 acres (0.4 km²) in 2006, and 175 acres (0.7 km²) in 2007.
The town celebrated its 250th anniversary on October 12, 2008.

Virginia school systems had practiced resistance following the United States Supreme Court ruling in Brown v. Board of Education (1954) that segregated public schools were unconstitutional.
The United States District Court for the Western District of Virginia ordered Frederick County schools desegregated (including those serving Stephens City) in Brown v. County School Board (1964).
In 1994, Virgil E. Watson was elected as the first African American to serve on the Stephens City Town Council.
Watson served for one term, from 1994 until 1998.

On September 17, 2004, remnants of Hurricane Ivan spawned an F1 tornado that touched down just south of the town along Interstate 81.
It caused approximately $1 million in damage and injured two people.
It was one of a record 40 tornadoes to hit northern Virginia that day.
The 20th century brought improvements to energy and domestic systems: electrical service was introduced in 1915; and in 1941, just before World War II, the town installed a water system. The construction of Interstate 81 (I-81) during the early 1960s depressed business development in the town. The wagon road, which had been made part of U.S. Route 11, had led traffic through the center of town, but the interstate passed less than a tenth of a mile to the east, drawing off development, retail trade and ultimately, businesses. This caused downtown to decline. Developers constructed new residential subdivisions both within and outside the town boundaries to the east for access to I-81.
The town surveyed its older buildings to establish architectural significance and to determine those that contributed to the town's historic center. The Newtown–Stephensburg Historic District was listed on the National Register of Historic Places in August 1992. Renovation of the town center has attracted heritage tourism. Anticipating more growth, the town annexed 360 acres (1.5 km²) of unincorporated Frederick County in 2005, another 100 acres (0.4 km²) in 2006, and 175 acres (0.7 km²) in 2007. The town celebrated its 250th anniversary on October 12, 2008.
Virginia school systems had practiced resistance following the United States Supreme Court ruling in Brown v. Board of Education (1954) that segregated public schools were unconstitutional. The United States District Court for the Western District of Virginia ordered Frederick County schools desegregated (including those serving Stephens City) in Brown v. County School Board (1964). In 1994, Virgil E. Watson was elected as the first African American to serve on the Stephens City Town Council. Watson served for one term, from 1994 until 1998.
On September 17, 2004, remnants of Hurricane Ivan spawned an F1 tornado that touched down just south of the town along Interstate 81. It caused approximately $1 million in damage and injured two people. It was one of a record 40 tornadoes to hit northern Virginia that day.
Stephens City, Virginia