Archaeologically and historically, Kotor Varoš municipality is very little explored. The history records that settlements existed in this area in the distant past, even in the Neolithic period. The area was inhabited by the Ilyrians at the time.

In the fourth century BC, this area was first penetrated by the Celts. In the late BC period, the area around the rivers Vrbas, Vrbanja and Sana was inhabited by the Thracian tribe Maezaeis. In the first century A.D. this area was conquered by the Romans, who gradually assimilated the Maezaeis and conscripted them in their legions and navy. There are several localities indicating the Roman buildings.

In the 7th century A.D. this area was inhabited by South Slavs. Slovenization of this part of Balkan peninsula gave rise to formation of the first small South Slavic countries. The first written records on a human settlement in the area date back to 1323 and 1412.  This is a charter of Stephen II Kotromanić (Bosnian ban from 1322 to 1353), who in 1322 gave Vukosav Hrvatinić the parishes Danica and Vrbanja with towns Ključ and Kotor as personal property, because Vukosav Hrvatinić supported him in takeover of the conflict with Babunić nobility. This feudal estate of House of Hrvatinić was in 1404 further expanded by Hrvoje Vukčić Hrvatinić (Stjepančić), who called himself the Master of the Lower Area (an area of the river Vrbas to over Sana).

Town of Kotor was under the Turkish government since 1519. At that time, a new settlement called Varoš (English: town) was founded beside the settlement Kotor, in the area of present-day Donji Varoš. The town was spreading in both directions and a new town called Kotor Varoš was founded.