The area of present-day Bandai was part of ancient Mutsu Province. It was the center of a mountain cult based on Mount Bandai and numerous Buddhist temples were founded from the Heian period. These temples grew to have a strong military and economic power towards the Kamakura period, and were only suppressed in the Sengoku period. The area formed part of the holdings of Aizu Domain during the Edo period. After the Meiji Restoration, it was organized as part of Yama District, Fukushima Prefecture. Bandai village was created on March 31, 1889 with the establishment of the modern municipalities system, and was raised to town status in 1960.