The settlement was first mentioned as "Lyva" in 1253. It was a small unfortified harbour town in the state of the Livonian Order. In the 14th century it was burnt down several times by the Lithuanians.

As a result of the Reformation, two Lutheran parishes emerged in Libau. One congregation was formed by the Protestants of Latvian language, the other one for German speaking Protestants.

The granting of the town charter took place in 1625. Soon after the construction of the harbour began. In 1698, a major fire destroyed most of the town's wooden buildings. The Great Plague of 1708 to 1714 claimed the lives of a third of the citizens.

The Svētā Jāzepa Katedrālē (St. Joseph Cathedral) is the episcopal church of the Roman Catholic diocese of Liepāja. The neo-Romanesque church was built between 1894 and 1900.