Located in the centre of the county of Surrey and at a junction of ancient north–south and east–west communications, the town has been a focus for transport throughout its history. Initially there was the construction of the bridge over the River Mole in the early medieval period. Later the Swan Hotel provided 300 years of service to horse-drawn coaches. In the late 20th century the M25 motorway was built nearby.
The origins of the town of Leatherhead appear to be Anglo-Saxon. Ashtead lay within the Copthorne hundred, an administrative division devised by the Saxons. The Leatherhead Museum has traced the history of the town from its beginnings in about AD 880 when it was known as Leodridan (dative case of a compound of "leode" and "rida"), meaning "place where people [can] ride [across the river]" in Anglo-Saxon). Later in the Domesday Book it was called Leret. Later forms recorded are "Lereda", "Ledreda", "Leddrede" (all second half of 12th century). The early settlement appears to have grown up on the east side of the River Mole, although Hawk's Hill, on the west side of the river, is said to be the site of an old Saxon burial ground. Some say that the Anglo-Saxon form was distorted from a Celtic form whose Welsh equivalent is Llwyd-rhyd = "grey ford".
To the east of the town is the line of Stane Street, an old Roman road. Most of it is now built over or is used as rural footpaths. The road leads from London to Chichester, passing through the strategic Mole Gap.
It has also been suggested that a second Roman road ran from Stane Street in a straight line close to Ashtead Church crossing the Mole at Leatherhead Bridge to a point very close to Effingham Church. Here it turned and continued in another straight line to Merrow Church crossing the River Wey near Guildford Bridge. It seems that this road was still in use in Saxon times and that is why all the medieval churches between Leatherhead and Guildford lie within a few yards of these two lines.
Leatherhead appears in Domesday Book of 1086 as Leret. It was held by Osbern de Ow (Eu). Its Domesday assets were: 1 church, belonging to Ewell, with . It rendered £1. Pachesham within Leatherhead appears in Domesday Book as Pachesham. It was held by Hugo (Hugh) from the Bishop of Lisieux. Its domesday assets were: 3 virgates. It had part of 2 mills worth 12 shillings, 4 ploughs, of meadow, woodland worth 3 hogs. It rendered £3 10s 0d (£3.50).
A market serving the developing agricultural economy developed at the crossroads and in 1248, Henry III granted to Leatherhead a weekly market and annual fair. The town survived an extensive fire in 1392, after which it was largely rebuilt. In common with many similar medieval towns, Leatherhead had a market house and set of stocks, probably located at the junction of Bridge Street, North Street and High Street.
During the Elizabethan and Stuart periods, the town was associated with several notable people. Edmund Tylney, Master of the Revels, who was in effect the official censor of the time to Queen Elizabeth I, lived in Leatherhead's Mansion House. A Wetherspoons pub in High Street is now named after him. Another notable local noble was Sir Thomas Bloodworth of nearby Thorncroft Manor, who was Lord Mayor of London during the Great Fire of London in 1666.
Leatherhead saw much expansion, with two major railways linked to it. (See below)
The Letherhead Institute was built. The spelling was said, in Victorian times, to be the correct form of Leatherhead.
Cherkley Court on the Beaverbrook grounds was home of Max Aitken, 1st Baron Beaverbrook. During World War II, Winston Churchill, the new British Prime Minister, would appoint him as Minister of Aircraft Production and later Minister of Supply. Under Aitken, fighter and bomber production increased so much so that Churchill declared: "His personal force and genius made this Aitken's finest hour".
Once there were several industries in and around the town, including Ronson's Lighters and Goblin Vacuum Cleaners. Both were used as ammunitions plants in World War II. Most of the plants pulled out of Leatherhead in the late 1970s or early 1980s. Today most employment is in commerce.
In the 1940s and '50s Leatherhead/Ashtead was made home to a Remploy factory, which are designed to provide work for disabled people in the local area. On 22 May 2007, Remploy announced that the Leatherhead factory along with 42 other sites would close.
In the late 1970s and early '80s, Mole Valley District Council decided to modernise the town, with a new pedestrianised high street, and large one-way system.
In 1986, the town was joined to the UK motorway system, when the M25 motorway was built to the north. Leatherhead became Junction 9, which has odd non-aligned entry/exit points on the two sides. The town is perhaps most frequently mentioned in the national media as the location of motorway traffic jams and accidents.