In early written sources, the town was called Graža or Gražiai, and from the 17th century onwards, with the addition of a suffix, as Gražiškiai.

The newly established village consisted of a hill with surrounding land and was named Graža or Gražiai.

In 1598, Jonas Naruševičius, the forester of Nemunaitis and supreme judge of the Lithuanian Tribunal, appointed Vaitiekus Gintautas as the first landlord of the village, and he founded the Gražiai manor.

On the initiative of Gintautas, the first wooden church was built around 1600, for which Naruševičius allocated a tithe from all the inhabitants of the Nemunaitis area.

In 1863, during the January Uprising, a group of rebels led by a peasant, G. Martinaitis, was active in the area around Gražiškiai.

The townspeople of Gražiškiai took part in the Russian Revolution of 1905, and in 1918 they supported the work of the State Council of Lithuania through a mass collective petition.

After World War II, the Lithuanian partisans of the Vytautas Brigade of the Tauras military district were active in the area.