It is on the west bank of the River Severn in the Forest of Dean District, and is 16 miles (25 km) southwest of Gloucester.

According to Cook (1906) the toponym "Lydney" derives from the Old English *Lydan-eġ, "Lludd's Island", which could connect it with the name Nudd/Nodens.

A. D. Mills suggests "island or river-meadow of the sailor, or of a man named *Lida", citing the forms "Lideneg" from c. 853 and "Ledenei" from the 1086 Domesday Book.

In 1588 the Vice-Admiral of England Sir William Winter was granted the manor of Lydney in recognition of his services against the Spanish Armada.

In 1940, the Pine End Works was built on Harbour Road, a Government run shadow factory producing plywood for the aircraft industry.

[10][11] In 1964 the town was the site of the Lydney Murder, a significant case in the history of the use of entomology to assist criminal investigations.

By studying the maggots found on the body, forensic entomologist Professor Keith Simpson was able to establish a date of death of around 16 June 1964.

The Lydney Murder was the subject of an episode of the Discovery Channel documentary: "Crime Museum UK with Martin Kemp".

The Severn Railway Bridge crossed just north of Lydney from Purton to Sharpness on the eastern bank.

After only a short time the coachworks closed down in March 1952, the uncompleted orders being transferred to Bristol TCC and Eastern Coach Works.

The lowest tier of local government is Lydney Town Council which covers an area of approximately 8 square miles.

[23] They also have a Midweek senior XI team in the Forest of Dean Midweek League,[24] a Sunday XI team that play the occasional friendly matches in and around the local district, and an established junior training section that play competitive cricket in the Leadon Vale Youth Cricket League.

[25] Former Glamorgan captain and England opening batsman Steve James began his career at the club.

The Training Band and Starter Group offer tuition for people at various stages of learning to play brass instruments, and regularly perform at events and concerts in the local community.