Archaeology has shown continuous occupation of the site of Bad Tölz since the retreat of the glaciers at the end of the Ice Age.

The name "Reginried" appears as that of a settlement belonging to the monastery at Tegernsee in earlier texts, which is probably the same as Reid in the western part of Mühlfeld.

Hainricus de Tolnze built a castle on the site, which controlled the river and road traffic in the region but which no longer exists.

During this war, in 1705, the vintner Johann Jäger of Tölz led a band of farmers to battle at Sendling (south of Munich).

In 1937, SS-Junker School Bad Tölz (an SS officer candidate training camp) was established near the town.

Bad Tölz would also be the last town to be "passed through" by the Holocaust death march[3] from Dachau to the Austrian border, that would be halted by Nisei U.S. Army artillery soldiers on 2 May 1945, just two kilometers short of the next village to the east of it, Waakirchen.

On the western bank of the Isar River lies the Kurverwaltung, or modern spa, whose iodine-rich waters are known for their soothing and healing powers.