Letterkenny began as a market town at the start of the 17th century during the Plantation of Ulster - the project by which English and Scottish settlers were given confiscated Irish lands on condition they bring tenant farmers, build defensive structures, and reshape the landscape into a loyal Protestant settlement. Letterkenny Castle, built in 1625, once stood near where the Cathedral of St Eunan and St Columba stands today, south of Mount Southwell on Castle Street. Most Plantation-era Letterkenny is gone. Mount Southwell Terrace, a row of five Georgian red-brick houses built in 1837 by Lord Southwell, survives - one of them once a holiday home of Maud Gonne, muse of W.B. Yeats. The Donegal County Museum sits in the old workhouse on High Road, completed in May 1843. The town achieved formal status in the early 1920s after the partition of Ireland, when many banks that had been based in Derry - now suddenly across an international border - opened Letterkenny branches.

The Cathedral of St Eunan and St Columba was completed in 1901 and remains Letterkenny's tallest building. Designed by William Hague of County Cavan in a light Victorian neo-Gothic interpretation of 13th-century French Gothic, the cathedral dominates the town's skyline from almost every approach. It is County Donegal's only Catholic cathedral and the seat of the Diocese of Raphoe. Opposite stands Conwal Parish Church, parts of which date from the 17th century. A short walk away on Sentry Hill rises St Eunan's College - locally known simply as The College to distinguish it from cathedral and GAA club. Built in 1904 in an Edwardian neo-Hiberno-Romanesque style with four turreted round towers and flying buttresses, the College carries the same dedication to Adomnan or Eunan, the seventh-century Abbot of Iona who was native to what is now County Donegal.

In 2015, Letterkenny was judged the tidiest town in Ireland. In 2008 it represented Ireland in the Entente Florale, having won gold in the Large Urban Centre category of the 2007 National Tidy Town Awards. The contest was not without complications: the display of competing national flags on prominent town poles included the Union Jack, which proved upsetting to residents who saw it as a symbol of continuing British rule across the nearby border. The flag was taken down for safety reasons one night, then remounted. The town won gold anyway. The newer town council offices on Port Road - known locally as The Grasshouse for the sloping grass roof above a band of aluka matt cladding and a long ramp to the first floor concourse - were described by The Sunday Times in 2002 as a building of international interest. The previous council building, off the Port Road, was destroyed by fire in 2004 and demolished.

Letterkenny sits at the centre of industry in the northwest of Ireland. Major employers include Letterkenny University Hospital, Pramerica (a Prudential Financial subsidiary taken over by Tata Consultancy Services in 2020 and grown to over 2,000 employees), Optum Health Care, the Department of Social and Family Affairs, Boston Scientific, and UnitedHealth Group. The economy is heavily dependent on cross-border trade and on the currency exchange rate between the Euro and the British Pound. The town centre is the major shopping destination for north Donegal and parts of Derry. Three shopping malls anchor the retail - the Courtyard, the Letterkenny Retail Park, the Letterkenny Shopping Centre. Main Street, the historic centre, has shifted toward nightlife: it is the nightlife destination not just for Donegal but for much of Ulster, especially weekends drawing visitors from Derry. The local accent borrows from both sides of the border. The Cathedral Town is a place where Irish and British identity intermix in ways the rest of the island, north and south, often forgets are possible. Letterkenny is also, in pop-culture trivia, the namesake of the fictional Ontario town in the Canadian television series Letterkenny. There is even a small actual locality of that name elsewhere in Ontario, in the township of Brudenell, Lyndoch and Raglan.