Billund has been historically been associated with the Grove Church (Danish, Grene Kirke) whose original Romanesque building was first mentioned in 1291. The city's name was first mentioned as "Byllundt" in the year 1454 and as "Billund" in 1510.
In 1880, the town's first windmill was built on the road between Vejle and Varde. In 1895, the mill burned to the ground but was rebuilt in 1897, this time in the style of Dutch windmills. That same year, a railway was built from Vejle to Billund, and the route was later extended to Grinnell in 1914.
In 1916, Ole Kirk Christiansen, who would later found Lego, bought a Billund furniture company founded in 1895. He invested in the town, creating a new dairy and Skjoldbjerg church a few miles south of town. In 1930 Kirk Christiansen began producing utility items such as ironing boards, stepladders and miniature toys. His first toys were created from scraps from the production of his other goods but true toy production started in 1932. In 1934, the toy factory was named "Lego".
In the late 1930's Billund experienced growth due to the factories and began to build its own waterworks, gymnasium and city hall, even though the local power station was closed and located elsewhere.
During the Nazi occupation in World War II, the old Lego Factory was destroyed by fire in 1942, but a new one was immediately erected. In 1946, the railway track from Grinnell was extended to the Lego factory. Plastic Lego Bricks were first released from the factory in 1949.
The 1950s brought a recession to Billund with the closing of the railroad. In response to the growing poverty, Billund Housing Association was founded and created affordable housing as well as a retirement home. Lego created a large park north of town with a playground, outdoor scene, toboggan hill and a man-made lake in 1959. In 1962 the Billund Airport was inaugurated, first as Lego's private airport, and was later opened for other uses. Legoland