The beginnings of settlement in Żary date back to prehistoric times. The word "Zara" (which probably referred to a small independent Slavonic tribe) appeared for the first time in Thietmar's Chronicle from 1007. At that time, during the reign of Boleslaus the Brave, the Land of Żary and Lusatia were attached to Poland.

The town was located according to the Magdeburg Law about the year 1260. Żary had three centres: a market settlement situated near the "salt route" leading from Leipzig to Wrocław, a stronghold (later on a castle) erected among swamps and a Franciscan settlement dating back to 1274.

As a consequence of turbulent history of the Silesian and Lusatian borderland, Żary frequently changed its rulers. The town was under the control of Silesian Piasts (until 1364), Czech kings (until 1635), Saxon electors (until 1815) and Prussian rulers.

The owners of Żary represented wealthy families such as the Dewins, Bibersteins and Prominitzes, whose residences still stand on the castle hill.

For several centuries Żary was the centre of an "independent class state". Its citizens grew rich from trading and practicing crafts. As early as the 14th century the town had guilds of clothiers, linen-drapers, brewers, shoemakers and dyers. In the 19th century it became an active industrial centre. An important role was played by the local textile factories which employed 50% of all the people working in industry.

During the World War II the Germans moved a branch of the Focke-Wulf Aircraft Company to Żary. In April 1944 an allied air raid heavily damaged part of the buildings in the Old Town. In February 1945 the Red Army marched into the town. Under the agreement of the Postdam Treaty, Żary returned to Poland.

Georg Philip Telemann - after Johann Sebastian Bach, the second most eminent German composer of the 18th century. In 1704-1709 he was the bandmaster at the court of Erdmann II Promnitz. It was in Żary that he created, among other masterpices, his "Polonaise Suite".

Erdmann Neumeister - one of the leading authors of European Protestant songs, who lived in 1671-1756. He was Erdmann II Promnitz's preacher.

Julius Giovanni Simonetti - a famous Italian architect and the main designer of the Promnitz residence in Żary whose construction was completed in 1726.