When war was declared between the United States and Britain in 1812, the schooner was requisitioned as a British transport. The defeat of the British Fleet on September 9, 1813 in the Battle of Lake Erie left the Nancy as the only British ship on the Great Lakes.
On August 14, 1814, thee American schooners, Niagara, Tigress, and Scorpion, arrived at the mouth of the Nottawasaga River, where they planned to await the return of the Nancy from Fort Michilimackinac. While gathering wood onshore, the Americans discovered that the Nancy was actually hidden a short distance up the river. A battle ensued in which the Nancy caught fire, burned to the waterline, and sank.
Over time, the river deposited silt around the sunken vessel forming a small island. In 1928, the hull was raised and placed on display on what is now known as Nancy Island. As part of a Canadian centennial year project in 1967, a lighthouse was built on tiny Tower Island, which is accessed by a foot bridge from Nancy Island. This tower was designed as a replica of the Collingwood Outer Range Front Lighthouse that was established in 1884 and torn down in 1961. At the time the lighthouse was built, Nancy Island was known as the Museum of the Upper Great Lakes, and the lighthouse was used as part of a maritime theme. Visitors can climb the tower to see a fourth-order lens in the lantern room.
In 2008, the lighthouse received a makeover by Renovations by Rick. Rick Deveaux and his crew spent just over a month installing a new railing around the top of the tower, replacing the windows, and covering the tower with cedar shingles. The Town of Wasaga Beach funded the $32,000 renovation, and on Friday October 3, the Minister of Natural Resources cut a ribbon to officially reopen the Nancy Island Lighthouse.