The actual history of the town began with the construction of the castle (first mentioned in 1153) during the rule of Volrad I, Count of Dannenberg (1153–1169), who had been given the task of settling and securing the territory by Duke Henry the Lion.

The Waldemarturm is a local historical landmark, a tower in which the Danish King Valdemar II was imprisoned from 1223 to 1224.

However, it is situated very close to the Elbe river, which served as the border between East and West Germany until 1990.

Lüchow-Dannenberg is situated in a region known as the Wendland, a mostly rural and agricultural area on the eastern edge of Lower Saxony.

Starting in the 1970s, Dannenberg was a center for anti-nuclear protests due to the government's plan to build a nuclear waste site in Gorleben, a municipality within the district.