For his services in the Texas Revolution, John Burleson received 1,280 acres (5.2 km2) of land and established a permanent settlement in the 1850s. The city was first named Burleson; however, the name was gradually changed to Lampasas Springs because of the existence of seven mineral springs. When the county was created in 1856, the law specified “The county seat shall be same name as the county.” The city of Lampasas was officially incorporated in 1883.
Several theories attempt to explain how the name Lampasas came to be. The Texas Almanac states the word came from a Spanish word for “lilies” found in nearby streams. Another source states the word comes from the Spanish name Lampazos. The name was given to the local river by the Spanish Aquayo Expedition in 1721. It is believed the name was inspired by a Mexican town that also had beautiful springs. The town was also the location of the birth of the Farmers' Alliance, founded in 1876.
The Mother's Day Flood of 1957 saw Sulphur Creek, a local river, strike the city in devastating flash flood which claimed five lives and destroyed many homes, businesses, and other property around downtown Lampasas. In the aftermath, a series of levees and reservoirs were constructed to prevent damage from future catastrophes.
Since 1972, Lampasas has held an annual fair called the Spring Ho festival each July.
Like nearby Mineral Wells, Lampasas has mineral springs health spas which once claimed to cure "everything". The 25-bed Rollins Brook Community Hospital in Lampasas was established by two physicians in 1935, one of whom was Herbert Bailey Rollins, originally from Pineville, Kentucky. In 1958, Rollins Brook was the smallest accredited hospital in Texas. In 1981, Rollins was sold to a for-profit health care provider in Houston. Over the next decade, the hospital passed through a succession of owners. In 1991, the hospital declared bankruptcy and closed its doors without notice. Thereafter, citizens, unable to locate government or foundation grants, raised some $600,000 in community fund-raising activities to reclaim the facility. When it reopened on July 21, 1991, Rollins Brook became the only community hospital to survive bankruptcy. The story was broadcast by ABC News with Peter Jennings. In 1997, the hospital was sold again, this time to the Seventh-day Adventist Church. In 2005, Rollins Brook opened a new surgical section.