The medieval chronicler Thietmar of Merseburg (975–1018) mentioned a castle of Ilva, where in 1000 AD the Polish duke Bolesław I Chrobry met with Emperor Otto III on his journey from the canonization of Bishop Adalbert of Prague to the Congress of Gniezno.

[2] Iłowa itself is first documented in a 1356 deed by the Bohemian king and Emperor Charles IV, when he granted the fief of das halbe Dorf an der Czirne (i.e. half the village on the Czerna River, later called Halbau) at the border with the Silesian Duchy of Żagań to the Kotowice noble family.

The Kotowice family had a castle built here, that later became a notorious robber baron stronghold and was later destroyed by armed forces of the Lusatian League at the behest of the Görlitz citizens in 1440.

According to an annex to the 1635 Peace of Prague, Iłowa together with Upper Lusatia passed from the Lands of the Bohemian Crown to the Wettin elector John George I of Saxony.

Under the rule of his successor Elector John George II, a Protestant church was built and the settlement received town privileges in 1679.