Flatonia is on Interstate Highway 10, U.S. Highway 90, and the main line of the Southern Pacific Railroad twelve miles west of Schulenburg in southwestern Fayette County. It was established on April 8, 1874, on land acquired from William Alexander Faries (Ferris, Farris) by the Galveston, Harrisburg and San Antonio Railway and named for pioneer merchant F. W. Flato. At that time residents of the original Flatonia settlement, one mile southeast, and Oso, three miles northeast, loaded their homes and businesses on wagons and moved to the new location on the tracks. The post office that had been established at old Flatonia in 1870 was moved to the new town without changing its name. Flatonia was incorporated on November 10, 1875, and its first election was held the following December 6. By 1878 the town had a population of 800, and the economy depended equally on cattle and cotton.
The original settlers in the area were primarily Anglo-American. Opportunities provided by the railroad and inexpensive real estate, which sold for one to fifteen dollars an acre for uncultivated land and five to thirty-five dollars per acre for cultivated, brought successive waves of German, Bohemian, Greek, Arabian, and Italian immigrants. In the mid-1880s the Waco branch of the San Antonio and Aransas Pass Railway completed a north-south line through Flatonia and brought new settlements, Muldoon on the north and Moulton on the south. This competition for business plus the agricultural depression of the time caused a decline in the town's economy and by 1900 occasioned a substantial loss in population.
During the first half of the twentieth century the prospects of Flatonia rose and fell in response to the national economy and the markets for cotton and cattle. In 1950 the town had forty businesses, a population of 1,024, and a wide service area of farms and ranches. Cotton ceased to be a factor in the local economy during the 1960s, and many farms were converted to cattle ranching. The population remained between 1,000 and 1,500, and the number of businesses rose to sixty-nine by 1985. The completion of I-10 during the 1970s caused tourist-oriented businesses to move away from Highway 90 and the railroad to the new highway, a mile north. Each year a weekend-long "Czhilispiel," a festival named by Czechs and Germans who like chili, attracts visitors from a wide area of Central Texas. In 1990 the population of Flatonia was 1,295, and in 2000 it was 1,377.