Lampasas is on Sulphur Creek at the junction of U.S. highways 183, 281, and 190, in south central Lampasas County. Early Indian tribes made yearly pilgrimages to the Hancock mineral springs at the site; it is believed that the springs were discovered in 1721 by the Aguayo expedition on its way to East Texas and in 1735 by a Spanish inspection mission from San Antonio. In November 1853 Moses Hughes, his ailing wife, Moses's brother Nimrod, and his family arrived at Hancock Springs, later known as Gooch Springs. Hughes built a mill on the north bank of Sulphur Creek, a log home in 1856, and later a cotton gin. News of Hannah's cure by the spring waters drew others who lived temporarily in tents and wagons along Sulphur Creek. John Burleson, the county's first resident, was awarded 1,280 acres of land including the present Lampasas townsite on April 26, 1838, in return for his services during the Texas Revolution. After his death the land was deeded in 1854 to his daughters, Elizabeth Scott and Martha Moore. Elizabeth and her husband, George W. Scott, laid out the town of Burleson, then in Coryell County, in July 1855, and Elizabeth designed the plans for the town square. When the Texas legislature established Lampasas County on February 1, 1856, it named Burleson county seat and changed its name to Lampasas. A post office was established in 1857. On April 21, 1873, Lampasas incorporated, responding to the need for a law to keep livestock off the public square. The Lampasas Guards organized on July 1, 1859, to protect settlers from Indians. Indian raids, particularly by Comanches, worsened during the Civil War and after, and in 1870 a contingent of federal cavalry was quartered in Lampasas. By 1871 the town had fifteen to twenty businesses, including the profitable Dunn molasses business, several wool and mohair commission houses, and a number of county government agencies. Hart House was a stop on the stage and mail route. The Star Hotel, established in 1870, functioned as a community center, and a bank opened in 1884.
Methodists held the town's first regular services, received regular visits by circuit pastors by 1866, and built a church in 1880. Baptists built the county's first church in 1874, using lumber hauled from Austin. Camp meetings were held in Baptist-owned Hancock Park, then known as Anderson Park, and by noted evangelist William Evander Penn on the banks of Sulphur Creek. Catholics increased as Irish railroad workers flocked to the area in the 1880s. St. Mary's Catholic Church was established by Bishop Nicholas Gallagher, and a building was erected in 1885. A number of Protestant churches were also organized between 1880 and 1900. A courthouse fire on December 14, 1871, destroyed county records, and on September 27, 1873, heavy rains started a flood on Sulphur Creek that caused several deaths and extensive damage. The Donovan Mill was established by John Casbeer sometime after the flood. More recently, a fire at the Lampasas Ice and Produce Company on July 30, 1962, caused several explosions and released dangerous ammonia fumes. Several residents taught schools prior to 1869, when county subscription funded a two-story rock building on Sulphur Creek. W. W. Chandler began a public school in 1892 for which a building was erected around 1894. Community entertainment centered around school programs when an early theater, built in the 1870s, burned in the mid-1880s. In 1875 Douglas Y. Fox opened a race track that became the site of the first Lampasas County Fair. Charles A. Woolridge published the first county newspaper, the Chronicle, beginning on June 1, 1859.
In 1882 the Gulf, Colorado and Santa Fe Railway was extended to Lampasas, ending the town's cattle-trailing and gun-fighting era. As the western terminus of the line, Lampasas became a trading center for West Texas. New business houses were established, real estate prices rose, and the population soared to an estimated 3,500. Residents were frequently housed in tents because buildings could not be built fast enough. When the railroad resumed construction west in the mid-1880s, however, the population of the boomtown moved on. In 1990 Lampasas was a station on the Atchison, Topeka and Santa Fe. By 1882 tourists discovered the mineral springs and Lampasas became a health resort. In that year a syndicate of railroad officials built the Park Hotel near Hancock Springs and ran a mule-drawn streetcar to the railroad station. Subsequently, the Hannah Springs Company built the Hannah Bath and Opera House, where the Democratic state convention was held in 1893. In July 1901 five local women's clubs established the Lampasas Library and Social Club; a new building was constructed in 1962. The county's only hospital, Rollins-Brook, opened in April 1935. Buildings of Centenary College, managed by Methodists from 1884 to 1897, became St. Dominic's Villa, a Catholic girls' boarding academy open to all faiths, in 1900, but the institution closed in 1925 under pressure in part from the Ku Klux Klan.
The first power plant was established at Hughes Mill in 1890. In the 1920s the Texas Power and Light Company provided electric service. On March 28, 1936, the Lower Colorado River Authority brought power supplied by the hydroelectric plant at Buchanan Dam. Stokes Brothers, later the Central Texas Trading Company, organized a produce house around 1880 to handle crops, encouraged the import of Angora goats, and by 1910 purchased much of the wool produced in Texas. During the depression of the 1890s little money circulated, and people bartered their produce locally. Later, wholesale houses were established, and the Lampasas Auction Barns were built north of town in 1959. In 1990 the town's economy centered on agriculture and pedigreed stock raising.
In 1901 the Abney gas well was drilled, but the presence of water that made it unprofitable prompted its use as a sulfur or salt well until 1949. Between 1920 and 1922 other test wells were drilled for oil and gas, but water prevented commercial development. Lampasas weathered the Great Depression smoothly and by the 1940s welcomed new industry as the home office of the Motor Freight Company. Fort Hood greatly affected the city's economy. During World War II Hancock Park, known temporarily as Panther Park after the Tank Destroyer Center symbol, was used as a recreation center for troops. After the war Lampasas experienced a boom when the camp flooded the town with new residents. Attempts were made to restore the town's popularity as a vacation center after World War II. Hunting, fishing, and boating, as well as an annual rodeo, golf tournament, and historical festivals, attracted tourists. The town is a deer-hunting capital. Until 1960, when the Taliaferro home was sold, the town featured the Taliaferro collection of natural, scientific, and literary curiosities and area Indian relics. The population of Lampasas was estimated at 2,107 in 1904, reached 3,426 by World War II, jumped to 4,872 by 1952, and peaked at 7,682 in 1978. In 1988 the town had 6,749 residents and 145 businesses. In 1990 the population was 6,382. The population was 6,786 in 2000.