In the mid-1970s, the neighboring city of Hitchcock attempted to annex the Morningview neighborhood in eastern Alta Loma, to which the neighborhood residents were opposed. To avoid annexation, a petitioning effort was begun to incorporate the area into a new city. On January 21, 1978, a ballot proposal to incorporate Alta Loma and parts of Arcadia (a total of nine square miles) passed by a wide margin, and the city of Santa Fe was born. In the years since, Santa Fe has grown to include all of Arcadia and parts of Algoa, and has become an affluent area of Galveston County.
On February 14, 1981, the Ku Klux Klan hosted a fish fry on a private farm in Santa Fe to protest the growing presence of Vietnamese shrimpers in the Gulf. During the event, a Vietnamese fishing boat was ceremonially burned. That controversy, as well as similar conflicts in nearby port towns like Rockport, led to a decision of the United States District Court, S.D. Texas, Houston Division Vietnamese Fishermen's Association v. Knights of the Ku Klux Klan, and also served as the basis for the 1985 Ed Harris film Alamo Bay.
On June 19, 2000, the Supreme Court ruled that the Santa Fe Independent School District's policy of permitting "student-led, student-initiated" prayer at football games and other school events violated the Constitution's prohibitions against the establishment of state religion.
On the morning of May 18, 2018, a 17 year old student mass shooting occurred at Santa Fe High School, killing ten students and faculty and injuring thirteen others. Students and faculty evacuated the building when a fire alarm was activated. Dimitrios Pagourtzis is awaiting trial for ten counts of capital murder for the shooting.