Deutschneudorf is situated next to the border to the Czech Republic in the valley of the Schweinitz river, downstream from Nová Ves v Horách.

August Rohdt, owner of smelting works in Grünthal was awarded the mines Fortuna and Pallas in 1620, and had an iron furnace built in 1637 to supply the wire drawing mill in Rothenthal.

The settlement in an area that was nearly depopulated after the Thirty Years' War and a plague outbreak is first mentioned in a document of 1651 as Naudorff unterm Catherbergk (referring to the dialectal name of nearby St. Katharinaberg) and had only three houses in 1657.

A forced march of German-speaking people expelled from Chomutov on 9 June 1945 which caused many deaths led through Deutschneudorf and is commemorated in a monument.

The municipality was known as the site of a dig for Gold stolen by Nazi Germany in World War II.