We collected modern diatom samples from Currituck Barrier Island, Oregon Inlet and Pea Island marshes, Outer Banks, North Carolina, USA, which have different salinity regimes due to their varying distances from a major barrier island inlet. Multivariate analyses separate the saltmarsh diatom assemblages into distinct elevational zones, dominated by differing abundances of polyhalobous, mesohalobous and oligohalobous taxa, suggesting that the distribution of saltmarsh diatoms is a direct function of elevation, with the most important controlling factors being the duration and frequency of subaerial exposure. We developed the first diatom-based transfer function for the east coast of North America to reconstruct former sea levels based upon the relationship between diatom assemblage and elevation. Results imply that this is possible to a precision of ±0.08 m, superior to most similar studies from temperate, mid-latitude environments. The transfer function is used to construct a relative sea-level curve from fossil assemblages from Salvo, North Carolina. These results suggest a sea-level rise of 0.7 m over the last c. 150 years, at an average of c. 3.7 mm year−1. This is consistent with existing sea-level data, and illustrates the utility of the transfer function approach.