The first known written source of Lilla Edet dates back to the 16th century. The name comes from "ill", which means small, and from "ed", meaning a land passage between waterways, something similar to an isthmus. So in other words, this is the small isthmus, the large "Store Edet" has another name these days, Trollhättan.

It was the rapids Bergaström that prevented ships to pass Lilla Edet along the river Göta Älv. this obstacle was cleared in 1607 when a lock was completed after a few decades of work. Once completed, it was by many sources, the first lock in Sweden. It was however, destroyed in the wars with Denmark and then later rebuilt in 1784. It was also getting competition from the locks and canal built along the other shores of the river in Strömstad i 832.
The year 1888 was a dark year for three Swedish towns. This is the year that both Sundsvall and Umeå suffered devastating fires and where in large parts destroyed. Lilla Edet shared their faith and all three fires actually occurred on the same day-
The 20th century stated with increased development in Lilla Edet. The railway arrived in 1906, the current locks in Ström where where completed, and the first bridge across the river was built in 1926. The hydroelectric power plant was also opened in 1926, with three turbines, a fourth was added in the 1970`s.