Little Ludwigslust has a story whose significance seem far out of proportion to its size. The town was founded in the 18th century when the son of a local duke, one Prince Ludwig, built a hunting lodge and liked it so much that he gave it the town's current name, which translates to 'Ludwig's Pleasure'. The town grew up around the castle, which was enlarged over the centuries that followed.

During WWII, the Nazis built the Wöbbelin concentration camp close to Ludwigslust. The town was at first liberated by the British troops, then the Americans, but they were forced to hand it over to the Soviet Union under the post-war Yalta Agreement. Ludiwgslust was a part of East Germany until the country's reunification in 1990.