Tern Island provides nesting habitat for Least Tern and Common Terns, two state-listed coastal waterbirds. It also serves as a fall migration rest stop for large numbers of shorebirds. The tidal flats north of the island are an important feeding area for migratory shorebirds, and the mussel beds surrounding the island support relatively large numbers of feeding American oystercatchers during the spring through fall. Uncommon species such as Whimbrels and Marbled Godwits, Hudsonian Godwits, and even a Bar-tailed Godwit have been regularly recorded on the island.

Tern Island Wildlife Sanctuary, 28 acres, located just off the town dock, is an island in Chatham Harbor protected from the open waters of the Atlantic Ocean by Nauset Beach but remains strongly influenced by changes in the Nauset Beach barrier island, which can result in altered wave and current patterns.