The Roman fortress of Kaleto, located 2 km southwest of Sredets, was constructed at the end of the fifth and beginning of sixth century AD.

The fortress was abandoned during Ottoman rule of Bulgaria, and the population of Potamukastel resettled at the location of the modern town and founded the village of Karabunar (Bulgarian: Карабунар) ("black well" in Turkish).

King Charles XII of Sweden is known to have stayed overnight in the village in 1713 en route to Constantinople, and St. Sophronius of Vratsa worked as a teacher in Karabunar in 1792–1793.

Russian Army data from 1827 mentions it as a purely Bulgarian village and it was visited by Vasil Levski in 1868.

Karabunar became part of the autonomous province of Eastern Rumelia after the war and was annexed by the Principality of Bulgaria in 1885.