The town was founded in the 12th century. It rapidly became an important town, due to the Old Salt Route, on which the salt produced in the salt mines of Lüneburg (Lower-Saxony) was shipped to the baltic harbour of Lübeck, and the Stecknitz Canal, which was a precursor of the today's Elbe-Lübeck Canal. Although situated in the midst of the medieval duchy of Lauenburg, the town was mortgaged to the Hanseatic town of Lübeck, which ruled Mölln from 1359 to 1683. Back from this times dates the Möllner Schützengilde von 1407 e.V. which was founded 601 years ago and still exists today with almost 300 members.
Mölln calls itself the Eulenspiegel town, due to Till Eulenspiegel, a legendary trickster known for exposing vices and provoking thought. Eulenspiegel is said to have lived in Braunschweig (Brunswick), but his last year of life he allegedly resided in Mölln. He died from the plague in 1350. Although his existence is not proven, there are several monuments to him in Mölln.
In 1992, right wing extremists set fire to Turkish-inhabited houses, killing three girls.