The club was founded in 1940, under the name Albacete Fútbol Asociación, being later changed in an attempt to make it sound "more Spanish". After years playing in the lower leagues, Albacete first played in the second division in 1985–86, repeating the feat five seasons later.
After years in the second division facing serious economic and sporting difficulties, Albacete returned to the top flight in the 2002–03 campaign, led by César Ferrando (later of Atlético Madrid). However, it dropped in 2004–05, after just six wins from 38 matches, going on to stabilize in the subsequent seasons in the second level.
The 2010–11 season brought two coaching changes, with both Antonio Calderón and David Vidal (who returned to the club only a few months after leaving) being fired, as Albacete returned to the third division after 21 years. On 6 December 2011, Andrés Iniesta – who played for the club in his youth before joining Barcelona – became the club's major shareholder, donating €420,000 to the cash-strapped club. The team managed to reach the last 16 of the Copa del Rey nonetheless, notably beating Atlético Madrid 3–1 on aggregate.
In March 2013 Agustín Lázaro, CEO of Iniesta's winery enterprise, was appointed as Albacete's chairman. In June the player loaned the club a further €240,000 to cover unpaid wages, thus preventing its administrative relegation to the fourth tier.
In 2014 Albacete came back to Segunda División, but was relegated two seasons later after finishing the season in the 21st position.
The club plays its home matches at the Estadio Carlos Belmonte, which has an all-seated capacity of 17,200. Originally built in 1960, the stadium underwent two major redevelopments, the last being in 1998.