In 1361, a settlement was recorded on the Tollenstein (Tolstejn). Later, about 30 families from Upper Franconia (Germany) colonized the place. In 1654 the community had 36 farm houses and 60 craftsman houses, mainly linen weavers. John Barnes, an English expert on textile industry, was hired in 1731 to found a spinning factory in the town.
Economic development was further stimulated by the construction of the railway in 1869 and on 5 January 1870 Krásná Lípa became a corporate town. In 1910 the town reached its greatest population, with 6930 inhabitants. Along with other parts of the former Austrian Empire, Schönlinde became part of Czechoslovakia in 1919, now called Krásná Lípa, after having been attached to German Austria for some months.
Czechoslovak armed soldiers patrolling the town centre of Krásná Lípa (German: Schönlinde) in the Sudeten Region, September, 1938.
Notice the German language used by the country inn in the background.