Around 1000 BC, Celtic tribes inhabited much of western and central Europe, including the area around Baden-Baden. The Celtic influence can still be seen today in the names of many rivers, forests and towns in the Black Forest. A permanent settlement was probably first founded here by the Roman emperor Hadrian, who named it Aurelia Aquensis in honor of Aurelius Severus and the hot springs in the region. During the Middle Ages, the  province was renamed Baden after the  town of the same name. The Old Castle and New Castle, former residences of the ruling margraves, still stand today on hills overlooking the city. During the War of the Palatinate Succession between France and the "Holy Roman Empire of the German Nation", Baden was often attacked and completely burned in 1689.

By the 1800s, the town had been rebuilt again. The Friedrichsbad, or old baths, were built during the 1870s and widely praised for their restorative powers. Mark Twain, for one, declared that “I fully believe I left my rheumatism there.” Around the same time, the Spielbank, the oldest gambling casino in the country, was also built in Baden.

In 1931, Baden was officially renamed Baden-Baden. The town had the good fortune to remain mostly intact during both World Wars, and served as the headquarters for French troops in Germany after World War II ended. At this time, Baden was also united with Württemberg-Baden and Württemberg-Hohenzollern as the state of Baden-Württemberg and constituted in 1952.