When the Presidio of Adaes in East Texas was closed in 1773 and its residents moved to Mission San Antonio de Valero (later known as the Alamo), competition for desirable property increased, and the growing population settled on lands surrounding the mission. In 1792, the Conde de Sierra Gorda noted that a fairly large settlement of families, most of them agregados (squatters), had grown up adjacent to Mission San Antonio de Valero and just outside the Villa de San Fernando. By the 1780s, Mission San Antonio de Valero was in decline, and in 1793 the official order was given to distribute the surrounding lands among the mission Indians and the resident Spanish soldiers and civilians. From 1795 until 1809, the Pueblo de Valero, as La Villita was then called, had its own government with an elected alcalde (mayor), Don Vicente de Amador.
Physician, geologist, and botanist John Leonard Riddell, who visited San Antonio on September 25, 1839, described the construction he observed in the La Villita area: "Four-fifths of the houses are thatched with a kind of reed, the cat tail flag it may be, but I think it is some kind of sledge or grass. Some are in progress of erection on the Alamo side of the river." During the mid-19th century, La Villita became a diverse neighborhood in terms of the ethnicities and trades of its residents. Another period of growth and prosperity occurred after the Civil War through the 1870s.
Beginning in 1939, La Villita was transformed into a training ground for young artists and craftsmen. The project was funded by the National Youth Administration (NYA) and city funds totaling $110,000. Architect, O'Neil Ford, and Project Superintendent, E.M. Todd, coordinated their work with the NYA crafts program under the supervision of artist, Mary Vance Green.
Dedicated in May 1941, La Villita became a center for community events and home to artists and art galleries. The City of San Antonio's La Villita Historic District was established in 1969 and extended to the south in 1975. The area was listed on the National Register of Historic Places in 1972. Today the historic buildings of La Villita comprise an art community of shops, galleries, and restaurants.