Dubbing itself "the Peaceful Side of the Smokies," Townsend has the least traffic of the park's three main entrances. The park's other two entrances— one just south of Gatlinburg and the other just north of Cherokee— are home to multiple commercial attractions that draw millions of tourists each year. Townsend is more low-key, with a handful of inexpensive restaurants and motels, and several businesses geared toward outdoor sports.
As of the census of 2000, there were 244 people, 124 households, and 80 families residing in the city. The population density was 265.7 people per square mile (102.4/km²). There were 217 housing units at an average density of 236.3/sq mi (91.1/km²). The racial makeup of the city was 97.95% White, 1.23% Native American and 0.82% Asian.
There were 124 households out of which 15.3% had children under the age of 18 living with them, 58.9% were married couples living together, 3.2% had a female householder with no husband present, and 34.7% were non-families. 33.1% of all households were made up of individuals and 23.4% had someone living alone who was 65 years of age or older. The average household size was 1.97 and the average family size was 2.44.
In the city the population was spread out with 12.3% under the age of 18, 2.5% from 18 to 24, 19.3% from 25 to 44, 36.5% from 45 to 64, and 29.5% who were 65 years of age or older. The median age was 56 years. For every 100 females there were 86.3 males. For every 100 females age 18 and over, there were 86.1 males.
The median income for a household in the city was $36,250, and the median income for a family was $50,000. Males had a median income of $41,071 versus $29,375 for females. The per capita income for the city was $21,647. About 5.9% of families and 12.1% of the population were below the poverty line, including 7.7% of those under the age of eighteen and 11.5% of those sixty five or over.