The oldest history of the town is surrounded by mystery. It is certain, however, that an ancient trading trail had once led across the Kraslice Pass from Germany into the Bohemian Syncline, which was later known as the "Golden Erfurt Trail". The area was inhabited by the Lusatian culture (Cheb), which was replaced by Celts on a part of the territory (village of Kolová near Kynšperk) and later by Slavs. Nevertheless, none of the ancient cultures apparently founded permanent settlements in the Kraslice Pass. One could speculate about settlements built on the site of later castles (Kraslice, Hartenberg, Týn, Lipnice, etc.) for guarding purposes, yet there is no evidence to support such speculation.
Settlement in this area is documented in records during the reign of King Vladislav (also denoted as Vladislaus) who donated the demesne to the Waldsassen Monastery. Cistercian monks invited peasants from Bavaria and Pfalz to colonize the lands largely untouched by human hand. In the course of years from 1150 until 1350, first villages were founded by the settlers – i.e. Kostelní, Počátky, Černá, Mlýnská, Krásná, and Sněžná. In addition, around that time, the guards of the trading trail (known as the Chods also in the area of the Ore Mountains) built a stronghold on the Hausberg hill rising above the Svatava valley. In the mid 13th century, the older stronghold was replaced by a watch castle also known as New House with rapidly growing extramural settlements. These settlements merged into a single village called Greslas in the 1350’s. Apparently, the name of the village probably is a somewhat truncated vernacular name used for the hill covered with conifer woods. The castle soon acquired the name of the village.
The Waldsassen Monastery did not hold the Kraslice estate for long. In 1272, King Přemysl Otakar II (also denoted as Ottokar II of Bohemia) is said to have given the estate as feoff to the older of the Jindřichs of Plavno. Many uncertainties, however, are associated with this act as the deed documenting it was forged in the 15th century. Nonetheless, it is a proven fact that the Lords of Plavno were in possession of the Kraslice estate in the 14th century. Mining of silver, lead and tin ore had already begun in the hills surrounding the village and significantly contributed to the development of the land. In 1356, the son-in-law of Jindřich of Plavno, Knight Rüdiger von Sparneck, handed over the Kraslice estate and the castle to King Charles IV who presently gave it back to him as feoff. After the knight's death, however, the king purchased the feoff in favour of the Bohemian Kingdom. The period of reign of Charles IV was a time of prosperity also for Kraslice. Trade and mining industry aided by the kingdom brought profits and new inhabitants to the town. Apart from miners, many loggers, hunters, and charcoal burners earned their livelihoods in the so far virgin forests. The opening of new mines and the inflow of new miners resulted in the elevation of Kraslice to a royal town by Charles IV on August 15, 1370.
In 1401, King Václav IV (also denoted as Wenceslas IV of Bohemia) pledged Greslein Castle that lay above Kraslice as feoff to brothers Heinrich and Konrad of Reitenbach. They did not belong among virtuous knights, though, and they took advantage of the closeness of the trading trail in their own peculiar way – they took to robbing travellers. The robber-knights of Kraslice soon gained such reputation that in 1412, the Burgrave of Loket gathered his army and set out to Greslein, burnt the castle down and despoiled the town of Kraslice. Colonization of the once rich land could start all over again. Some 115 years later, the Kraslice estate was acquired by Jeroným Šlik and the town was raised to the status of a free mining town. In 1541, it received a new coat-of-arms – a silver letter G on a blue field. The heyday of mining and handicrafts was disrupted by the events following the Battle of White Mountain. The largely protestant population fled across the border to avoid forced catholicisation and founded "New Kraslice" in the village of Klingenthal. The Kraslice estate in Bohemia had been under the rule of the Nostic family from 1666 until the climax year 1848.
The 17th century saw the decline of ore mining in the area of Kraslice. The inhabitants were forced to find other ways to earn their livelihoods and thus, originally folk handicrafts begin thriving – e.g. lace trade, textile industry, manufacture of toys and especially musical instruments. The importance of the Kraslice estate is once again growing as evidenced, for example, by the building of a railway from Sokolov (known as Falknov then) to Klingenthal in 1886. In the mid 18th century, a factory manufacturing musical instruments is founded by Josef Jan Anger. In the following decades, namely the Amati brand gains world repute. Kraslice and Klingenthal are the first in the world to launch mass production of mouth organs. Textile industry is also developing, chiefly the production of velvet and plush.
The promising development of the area was discontinued by World War II and the subsequent displacement of the Sudeten Germans after the war had ended. Displacement affected a large majority of the original population. At present, the town of Kraslice is tackling issues that are typical for border towns, e.g. with unemployment reaching as high as 10% and with people leaving the area in search of job opportunities. New development could be secured by the opening of the border crossing to Klingenthal, which was opened in 2002, and the gradually intensifying co-operation with the neighbouring German town.