A popular, but apocryphal, story is that the town is named after "Princess Owatonna", the daughter of local Native American Chief Wabena who was supposedly healed by a nearby spring's magic waters,[7] which were said to be rich in iron and sulfur.

[6] In 1856, Josef Karel Kaplan emigrated from the village of Dlouhá Třebová, southeast of Prague, Bohemia (now the Czech Republic), and selected a quarter section [160 acres (65 ha)] of land near the town of Owatonna.

With just four stores and a pharmacy, Owatonna quickly prospered and grew to 1,500 inhabitants in five years.

Kaplan wrote about the Owatonna area in letters donated to the Minnesota Historical Society.

[11] The Minnesota State Public School for Dependent and Neglected Children was built in 1886.

In 1945, the orphanage closed and in 1947 the State Public School was officially abolished and all its lands, buildings, property, and funds were transferred to the newly established Owatonna State School,[12] which provided academic and vocational training for the developmentally disabled.

[citation needed] In July 2008, a Raytheon Hawker 800 corporate jet crashed near Owatonna, resulting in eight deaths.

[16] The new high school, a 317,000 square foot building, located in south eastern Owatonna, broke ground on May 6, 2021,[17] and opened to students on September 5, 2023.

Established in 1949 to preserve the history of Steele County, it has become one of the largest and most prestigious historical societies in the state.

In 1962, the Society permanently leased part of the southeast section of the fairgrounds to begin a pioneer village, the Village of Yesteryear, which has grown in the years since through the additional move of historic structures, as well as museum buildings built on site.

The city has grown in all directions, and now lies on both sides of the river, as well as above the ridge north of Maple Creek.

Significant growth in recent years has occurred to the northeast, where homes have been built along the ravine of Maple Creek as well as alongside Brooktree Golf Course, to the north, and to the southeast.

Geographical landmarks of note include Kaplan's Woods, a hardwood nature preserve on the southern border of the city; Cinder Hill, a steep 60-foot hill on Linn Avenue overlooking downtown that local athletes use for training; the Straight River dam, originally used to power a mill and now reconstructed to include a fish ladder; and the Forest Hill Cemetery, an old wooded cemetery on the ridge north of Maple Creek that marks the boundary between the oldest parts of the city and more recent developments.

Record rainfall events from September 22 to 24, 2010, caused flooding of the Straight River and Maple Creek in and near Owatonna, with developments in the floodplains of both streams completely inundated.

Other large employers in the community are Bosch, Jostens, Gopher Sport, Brunswick Corporation (Cybex International), Daikin Industries, Climate by Design (CDI), AmesburyTruth, ISD 761, Wenger Corporation,[26] Owatonna Clinic - Mayo Health System, and Owatonna Hospital - Allina Hospitals & Clinics.

[citation needed] In 1974, the City of Owatonna purchased the campus of the former Minnesota State Public School for Dependent and Neglected Children, which had been in operation from 1886 until 1945.

Although having a similar name and logo, this team is unrelated to the former Southern Minnesota Express, which relocated to Michigan to become the Motor City Machine.

District 24 includes portions of Steele, Rice and Waseca and Dodge counties in the southeastern part of the state.

Owatonna is in Minnesota's 1st congressional district, represented by Brad Finstad, a Republican.