Babati town has developed from a mere village since Babati District was established in 1985. The new status boosted the town into rapid growth. The town is located at the end of Tarangire National Park and at the base of Lake Babati, nestling under Mt. Kwaraa (2145 m asl.).
The story is told that the town's name resulted from misunderstanding a Gorowa boy by a German roadwork supervisor. The boy did not understand the question about the location's name asked by the German. He pointed at an older man and said "Baba ti", meaning in his language "this is my father". The German noted down the name "Babati" as he thought this was the township's name.