Lobethal [3] was settled in 1842 by Prussian immigrants, who migrated to South Australia with Pastor Gotthard Fritzsche aboard the sailing vessel Skjold, who initially went to Hahndorf but were alerted to good land in the upper Onkaparinga.

German Lutheran settlers provided compatriot, Johann Friedrich Krummnow, who had arrived in South Australia three years earlier and was a naturalised English citizen, with funds for land purchases to establish the community.

[6] The town, as with many German towns in South Australia, was built in typical Silesian Hufendorf style, with the cottages arranged in a line along the main street, and each family having a long, narrow strip of land (used for growing crops) stretching from the main street back to the village common, where all families could allow their animals to graze.

The advantages of this layout were that everyone had access to both fresh water and the main road, and a relatively even distribution of fertile and infertile land.

Due to the Great War in Europe, in 1917 the South Australian state government changed many German place names.

The Lutheran Church complex, and the Archives and Historical Museum, contain information about the lives of the towns German settlers, and are open to the public year-round.

Buses run from Lobethal to the Adelaide CBD via the South Eastern Freeway and Onkaparinga Valley Road.

Lobethal was the host town for the 1939 Australian Grand Prix, Australia's premier motor race of that year.

The race, which was won by Alan Tomlinson driving an MG TA, was staged on the Lobethal Circuit which comprised public roads in and around the town.