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The village is located on the north shore of Chaleur Bay, and was founded in 1604 by Samuel de Champlain. It was originally named "Cap-à-l'Aigle" (English: "Eagle Cape") after a nearby cape which resembled an eagle's head when seen from above. The name later evolved into its current form, Cap-Pelé ("Horned Cape"). On July 17–18, 1864 during the American Civil War two naval battles were fought between Union and Confederate ships off Cap Pelé resulting in a victory for the Union forces under Commander George Henry Preble over Confederate Captain John Taylor Wood.