Sunset Key's official name is Tank Island. The United States Navy constructed Tank Island to serve as a fuel tank depot during the Cold War. Dredging began in 1965 to form the island as well as to build passageways for submarines and other large vessels. However, the Navy's plans changed and the island saw little military action. Only two of the twelve planned fuel tanks were constructed, and although the fuel lines were run, the tanks were never filled.
In 1986, the government sold off Tank Island and other anchorages in Key West in an auction to developer Pritam Singh from New England. In 1988, the tanks were dismantled while the remaining fuel lines served as conduits for water, sewage, and utility. Power cables were later laid alongside the existing fuel pipes.
In 1994, the island was re-purchased and renamed to Sunset Key. The island is now owned by Tom Walsh, who also owns the Westin Key West Resort & Marina.