The village was recorded as Micelenie in the Domesday book, meaning 'the increasingly great island' from the Old English 'miclian' and from the Norsk 'Ře'.
It is best known as the site of Muchelney Abbey, a Benedictine abbey founded by King Athelstan in 939, and largely demolished in the Dissolution of the Monasteries. Architectural details of houses in the surrounding area are thought to incorporate fragments scavenged when the Abbey was destroyed.
Remains of Muchelney Abbey, including Tudor monks' quarters, and exhibits, are managed by English Heritage. Other tourist attractions in Muchelney include: the parish church of St. Peter and St. Paul; the Priest's House (built in 1308 and now managed by the National Trust), and; the pottery of artist John Leach. Adjacent to Muchelney are the hamlets of Thorney and Muchelney Ham.
The name Mucheln-ey means "big island". The -ey or -y suffix is the old English designation for "island", and thus is common to many of the villages in this area of the Somerset Levels, which stood as islands just above the marshes, which have since been drained.
St. Peter and St. Paul parish church, adjacent to Muchelney Abbey, has a ceiling enlivened with Jacobean paintings of bare-breasted angels, their nudity thought to symbolize innocent purity.
A highlight of the summer in Muchelney is the village's Lowland Games, a light-hearted adaptation of the Highland games. Events include (hay) Bale racing, Raft racing, Ferret racing, Wellie tossing, a dog show, and a battle of the bands (with the winning act getting a gig at the world-famous Glastonbury Festival).