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The town was named after a New York banker, Charles Luling. He was a personal friend of Thomas Wentworth Pierce and provided the financing for the railroad as well the purchase of the land that became Luling.

Luling was founded in 1874 as a railroad town and became a rowdy center for the cattle drivers on the Chisholm Trail. Contempt of the law by the cowboys helped Luling become known as the "toughest town in Texas". After the great cattle drives ended in the late 1880s, Luling quieted down to a town of about 500 and cotton ruled the local economy. Perhaps due to the arrival of immigrants, including a sizeable Jewish population, in the late-19th century, Luling began a long, slow, period of growth, and by 1925 the population reached 1,500.