The Wiradjuri tribe occupied the Lithgow area prior to white settlement. The valley was given its European name in 1827 by Hamilton Hume, in honour of William Lithgow, the auditor-general of the colony.
The first substantial settler was Scotsman Andrew Brown who later founded St Andrew's College at the University of Sydney. He established 'Cooerwull' station at what is now Bowenfels in 1824 and built a water-powered mill which he later converted to steam power by using coal mined on his property, although the state of road transport over the Blue Mountains precluded commercial mining.
Construction of a railway line into the Lithgow Valley began in 1866. At that time there were but five landholders in the valley. When it was completed in 1869, the Zig Zag Railway was acclaimed worldwide as a major engineering feat. It was intended to link Sydney to Bathurst and the prosperous farming areas beyond the Blue Mountains. Furthermore, it enabled the industrialisation of Lithgow (and therefore the establishment of the town) by making the exportation of coal and iron commercially viable. Not surprisingly, the railways became the biggest customer for that coal and iron. Consequently, the road-town of Bowenfels declined and Lithgow emerged as the railhead for the western region and the major industrial centre of NSW in the latter part of the 19th century.
However, the constant change of direction required by the Zig Zag system imposed limitations upon the length of trains which could use the line. In the long run this affected the economic viability of the service and hence of the area's industry.
Thomas Brown, whose property 'Eskbank' was the second-oldest in the valley (1835), commenced the first commercial coalmine the year the railway arrived. Iron was found on his property and iron smelting began in 1875. A blast furnace was soon producing 100 tons of pig-iron per week but efforts were undermined by cheap imports. One of the company founders, James Rutherford, dynamited the blast furnace in protest against the lack of protection.
The employees formed a co-operative and leased the works until William Sandford took over in 1886. He reorganised the plant, introduced Australia's first galvanising and corrugating works in 1894 and, in 1900, imported an open-hearth furnace and successfully puddled Australia's first steel. He built the nation's first modern blast furnace in 1907 but went into liquidation in 1908 when government assistance did not materialise.
The next owners, G & C Hoskins, made a great success of the venture which was employing 632 people by 1909. Poor industrial relations culminated in a nine-month strike in 1911 which ended in a riot when scabs were brought in. Nonetheless the demands of an expanding rail system and an encroaching war saw a second blast furnace opened in 1913. However, BHP opened a steelworks at Newcastle in 1915 which had obvious advantages over Lithgow. It was located adjacent a harbour and the company possessed its own collieries and ships. There was an insufficiency in supplies of both good quality ore and coke at Lithgow. In order to compete Hoskins joined Australian Iron and Steel and relocated to Port Kembla in 1928. The blast furnaces were removed in 1932 thereby exacerbating local unemployment during the Great Depression.
Iron and steel were not the only local industry. Thomas Mort set up a slaughtering and meat refrigeration works in 1875 with the first chilled meat arriving from Lithgow in 1880. In 1876 the Lithgow Valley Colliery set up the Lithgow Pottery, manufacturing bricks, pipes and domestic items out of clay. The pottery closed down in 1898 due to the depression, though pipes and bricks were still made.
Breweries and a copper smelter were amongst the other local industries. Four brickworks were in operation by 1889 when Lithgow was declared a municipality and there were seven collieries in 1901. One of the most consistent businesses and employers was the small arms manufactory which was opened in 1912. Not surprisingly it was a major employer during the two world wars.
Lithgow was declared a city in 1945. By that time much of the heavy industry was gone, although light industry continued to prosper and the population peaked in the years just after World War II.
In the late 1950s, a power generating plant was built at Wallerawang and, more recently, Mt Piper Power Station was opened near Portland. The stations created a ready market for local coal. However, since the mid-1980s, reduced demand, automation and rationalisation have caused the loss of nearly 2000 jobs in the mining, power and manufacturing industries which are the city's lifeblood.
Two of Lithgow's best-known offspring are Olympic sprinter, Marjorie Jackson (known as the 'Lithgow Flash') and radio and television personality John 'Roy Slaven' Doyle.
The Lithgow Blues Music Festival is held every year in November, the National Go-Kart Championships in October and plans are currently afoot to establish an annual festival around the time of the Lithgow Show in March.