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Lindsborg was settled in the spring of 1869 by a group of immigrants from the Värmland province of Sweden led by Pastor Olof Olsson. In 1879, the same year Lindsborg incorporated as a city, the first railroad came through. Lindsborg translates as Linden Castle from Swedish to English, The community is named for four men whose surnames included "Lind", N. P. Linde, S. P. Lindgren, S. A. Lindell, and J. O. Lindh, who had held prominent positions in a Chicago organization of Swedish farmers (Svenska Lantbrukskompaniet or First Swedish Agricultural Company) which was involved in the settling of Lindsborg until 1877.
Thirty percent of the current residents are of Swedish descent. Because the town has retained so much of the heritage of its founders, it has become known as "Little Sweden". The downtown features gift shops that specialize in Swedish souvenirs, including various sizes of Dala horses. Lindsborg has long been noted for the Svensk Hyllningsfest, a biennial celebration held in October of odd-numbered years since 1941, and other efforts to honor its heritage.