The town (civitas Altenburg) was first mentioned in a deed to the Bishop of Zeitz in 976. Remains of a Slavic castle on the Schloßberg ("Castle Hill") demonstrate that the town was probably a Slavic foundation, the capital of the shire of Plisni, taken over during the conquest of Meißen by Henry I. As shown by place names, the surrounding area (Osterland) was mainly settled by Slavs.
The first castle, located under the present day church St. Bartholomäi, was destroyed after the Battle of Hohenmölsen between Henry IV and Rudolph of Swabia. It was rebuilt on the Schloßberg outside of the town. The 11th century Mantelturm tower is still preserved. The castle later became an imperial palatinate and played an important part in the German takeover and settlement of the area between the Harz-mountains and the Elbe.
In the middle of the 12th century, the Hohenstaufen emperors patronized Altenburg, allowing the town to become a market and a mint. Together with the Royal forests Leina, Pahna, Kammerforst and Luckauer Forst, lands of the Groitzsch family bought by Frederick Barbarossa, Altenburg, Colditz, Zwickau and Chemnitz were turned into the Terra Plisnensis. Altenburg and Chemnitz as Imperial towns were intended to reduce the importance of Leipzig held by the Margrave of Meißen. Under Frederick Barbarossa much building took place, especially in the market area, and the town grew rapidly. An priory of canons regular was founded and the parish church was finished in 1172. The twin towers (Rote Spitzen) are still preserved. A town wall was constructed at the end of the 12th century.
During the Interregnum, the Terra Plisnensis was impounded, but bought back by Rudolph I of Germany, who desired the crown of Thuringia. Together with Zwickau and Chemnitz, Altenburg was part of the anti-Meißen Pleiße-city Union of 1290. After the Battle of Lucka in 1307 against Frederick the Brave of Meißen and his brother Diezmann, King Albert I lost Altenburg and the Pleiße-lands to the margraves of Meißen.
In 1455, Altenburg saw the division (Altenburger Teilung) of the Meißen lands between Elector Frederick II (the Gentle) and Duke William that led, after a failed attempt at reconciliation (Hallescher Machtspruch) to a war (1446–1451) between the two brothers (Bruderkrieg). In the second division of the Wettin lands between Ernest and Albert at Leipzig in 1485, Altenburg fell to Ernest, together with the Electorate (Kurland), Grimma, the Mutschener Pflege, Leisnig, Thuringia and the Vogtland. From this time on, Altenburg was historically connected with Thuringia. During the German Peasants' War of 1525, the Altenburg Augustinian monastery was attacked. In the summer, four peasant rebels were executed at the marketplace.
From 1603 to 1672, Altenburg was the residence of the Ernestine line, after that, it fell to Saxe-Gotha-Altenburg. During the Napoleonic wars it was a scene of a brief Allied raid by the Saxon General Johann von Thielmann. When the Ernestine lands were re-divided in 1826, Altenburg became the capital of Saxe-Altenburg. The last duke abdicated on 13 November 1918 after being promised 12 million Marks and the ownership of numerous castles. The free-state Saxe-Altenburg was merged with Thuringia in 1920.
During World War II, several subcamps of the Buchenwald concentration camp were located here. They provided forced labour for HASAG, the third largest Germany company to use concentration camp labour.
In 1952, Altenburg fell to the Leipzig District, but became part of Thuringia again in 1990.