During the 1890s, explorers in the area (including the noted bacteriologist Alexandre Yersin , protégé of the renowned French chemist Louis Pasteur), which was then part of the French territory of Cochinchina, asked the French governor-general Paul Doumer to create a resort center in the highlands. The governor agreed. The original intended site for the hill station was Dankia but Étienne Tardif, a member of the road-building expedition of 1898-99 proposed the current site instead. In 1907, the first hotel was built. Urban planning was carried out by Ernest Hébrard[1].

The French endowed the city with villas and boulevards, and its Swiss charms remain today. Hébrard included the requisite health complex, golf course, parks, schools and homes but no industry. The legacy of boarding schools where children from the whole of Indochina were taught by French priests, nuns and expatriates lasted until the end of French rule. There were seminaries of Jesuits (such as Pius X Pontifical College) and other orders. The elite Vietnamese National Military Academy graduated its first class of future leaders in 1950. There was also an aviator school at Cam Ly Airport.

During World War II, Đà Lạt was the capital of the Federation of Indochina, from 1939 to 1945.

In the mid-1950s, the Vietnamese Scout Association established their national training grounds at Đà Lạt.

The only major involvement Đà Lạt had during the 2nd Indochina war was during the 1968 Tet Offensive. Here fierce battles raged from Jan 31st to Feb 9th 1968 (about 10–11 days total). Most of the fighting took place between the South Vietnamese ARVN and the Viet Cong (VC) forces. Defeats and victories changed hands several times during the fighting in Đà Lạt. However, on Feb 9, 1968, the South Vietnamese ARVN were able to regain control of Đà Lạt. It is stated about 200 VC had lost their lives during this battle. While ARVN forces were known to have significantly fewer deaths, the injured list grew steadily throughout the engagement.