Lytle is on Interstate Highway 35 and U.S. Highway 81 in the far northwest corner of Atascosa County. The city limits extend into neighboring Bexar and Medina counties. The town was named for John T. Lytle, a rancher and traildriver active in the area in the 1860s and possibly as early as 1846. He was instrumental in establishing Lytle Station on the International-Great Northern Railroad in 1882. When a post office was granted in 1883, it was named for the train stop, which was near the Lytle-McDaniel Ranch and had a general store, a bar, and a casketmaker named W. J. Garnand, who became the first postmaster. Lytle was a shipping point and retail center for area ranchers and corn and cotton farmers. In 1884 it had a population of fifty, a union church, a district school, a hotel, and a physician. By 1892 the community had a population of 100, four general stores, a gin, two livestock breeders, and a Methodist church. In the late 1890s coal mining became a factor in the area's economy, and the population of Lytle rose to 150 by 1896.
The town survived a severe drought in 1885 and a hailstorm in 1895. By 1904 the population was listed as 212, and Lytle School had sixty-two students and two teachers. Lytle State Bank was chartered in 1910, and by 1914 the town's population had increased to 600. The school had 127 students. The weekly newspaper was called the Herald. The town had telephone service, an additional general store, and two lumberyards. The Medina Valley Irrigation Company's plans to establish a facility in Lytle did not develop as expected because the company went into receivership in 1917. Aside from a brief drop in population in the mid-1930s, Lytle continued to prosper, with steady population increases from 700 in the 1920s to 800 in the 1960s. The number of businesses during that time varied from a low of fifteen to a high of thirty-two. In 1990 the population was 2,255. The population was 2,383 by 2000.