The town was founded in the 11th century as Racisburg. The name is traditionally derived from the local Wendish ruler, Prince Ratibor of the Polabians, who was nicknamed Ratse. In the year 1044 Christian missionaries under the leadership of the monk Ansverus came into the region and built a monastery. It was destroyed in a pagan rebellion in 1066; the monks were stoned to death. Today monuments to the missionaries in two of the town's churches commemorate these events. Ansverus was canonised in the 12th century and his relics were entombed in the Ratzeburg cathedral.
Henry the Lion became the ruler of the town in 1143 and established a bishopric in 1154. He was also responsible for the construction of the late RomanesqueCathedral (Dom), built in typical north German 'red-brick' style. Henry also prompted the construction of the similar-looking Lübeck Cathedral and Brunswick Collegiate Church with his remains interred in the latter.
Though the town of Ratzeburg was part of the Ratzeburg diocese, the town itself was not within the territory of the Prince-Bishopric of Ratzeburg, but formed a part of the old Duchy of Saxony and became part of its dynastic partition of Saxe-Lauenburg around 1296, remaining with this duchy under altering dynasties until 1876. The cathedral quarter again formed an immunity district (Domfreiheit; cf. also Liberty) to the prince-bishopric, secularised as a principality in 1648. In 1619 Saxe-Lauenburg's capital was moved from Lauenburg upon Elbe to Ratzeburg and remained there since. The town was almost completely destroyed in 1693, when Christian V of Denmark reduced Ratzeburg to rubble by bombardment in his unsuccessful attempt to push through his succession to the dukedom against the prevailing House of Hanover. After this event Ratzeburg was rebuilt in baroque style. The castle, however, was never reconstructed or built anew.
Ratzeburg is known for its Olympic champion Ratzeburg Rowing Club, which was responsible for training, among others, the gold medalists at the 1956 Olympic Games in Melbourne. The grave of Ernst Barlach, perhaps the most notable creative artist to have made his home in Ratzeburg, is located in one of the town's cemeteries.
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