It is situated between the Harz mountain range in the south and the Hainberg hills in the north, approx. 13 km (8 mi) northwest of Goslar. The municipal area comprises the localities of Nauen and Ostlutter.
Lutter, named after a nearby creek, was founded by Emperor Otto I in 956 as a part of the Gandersheim Abbey estates within the Duchy of Saxony. A water castle was first mentioned in 1259, leased by the Bishops of Hildesheim to local nobles. In various times, it was claimed by the Dukes of Brunswick-Lüneburg, but re-acquired by the Hildesheim bishops in 1323. Thereupon the denotation Bischofslutter appeared in order to differ it from nearby Königslutter. The name Lutter am Barenberge (i.e. the Harz mountains) is documented since the 14th century.