A settlement area since the Hallstatt culture Bad Ischl was first mentioned in a 1262 deed as Iselen. In 1419 Archduke Albert V of Austria established the local seat of the Salt Chamber (Salzkammer) at Wildenstein Castle and Ischl was granted the privileges of a market town in 1466 by Emperor Frederick III. A first salt mine was opened in 1563, a salt evaporation pond (Saline) followed in 1571.
When in the early 19th century brine came into use for medical purposes, Ischl soon became a fashionable spa resort with notable guests like Prince Klemens Wenzel von Metternich and Archduke Franz Karl of Austria. The Hotel Post opened in 1828 was the first one in the whole Salzkammergut area. In 1849 Franz Karl's son, Emperor Franz Joseph I of Austria chose the town for his summer residence.
On August 19, 1853 the engagement between Franz Joseph and Elisabeth of Bavaria (Sisi) took place at the Seeauerhaus, Esplanade No. 10, which since 1989 has been the location of the Museum der Stadt Bad Ischl.
In 1854, the Emperor's mother, Archduchess Sophie, gave him the Kaiservilla (Imperial Villa) as a wedding present. The villa became the imperial family's summer residence; Franz Joseph described it as "Heaven on Earth". He also granted a nearby mansion to mistress Katharina Schratt, that could be easily reached via a hidden footpath. In the Kaiservilla on 28 July 1914 Franz Joseph signed the declaration of war against the Kingdom of Serbia, signalling the start of World War I. He left Bad Ischl on the following day and never returned. The villa is still owned by the Habsburg-Lorraine family, although the grounds and parts of the residence are now open to the public