The name itself sounds like a riddle, and Cornish antiquarians spent centuries arguing about it. Some 17th-century minds insisted it broke down into Lost, meaning tail, and Withiel, meaning lion, with the lion being the lord up in his castle. Romantics in the 18th century preferred a French derivation, pres d'eaux, near the waters. Current scholarship is more prosaic: Old Cornish Lost Gwydhyel, the tail-end of the woodland. Less heraldic than a lion in a castle, perhaps, but it suits the geography. Lostwithiel sits where the wooded slopes of the Fowey valley narrow toward the river, and the trees still come right down to the water in places. Norman lords arrived in the 12th century, built Restormel Castle on the spur above town, and chartered Lostwithiel as a borough in 1189.

In the late 13th century, Edmund, 2nd Earl of Cornwall, transformed Lostwithiel from a borough into a capital. He oversaw the construction of the Stannary Palace, the square church tower of St Bartholomew's, and the bridge with six pointed arches that still spans the river. The Stannary Palace was the administrative heart of Cornwall's tin industry: an exchequer hall where ingots were assayed, stamped with the duchy mark, and taxed before they could be sold. Tin from across the moors flowed through this single chokepoint. The palace today is a roofless ruin behind Quay Street, but its surviving walls still trace the outline of medieval bureaucracy. Lostwithiel was, for a brief golden century, the most important town in Cornwall, returning two members to Parliament from 1305 onward and hosting the Earl's court.

Tin built medieval Lostwithiel; iron sustained the Victorian version. The Trinity Mine opened in the 1790s to extract haematite from the hills west of town, and in 1797 the antiquary Philip Rashleigh found a sample of goethite here that became a type-locality for the mineral. The visit that mattered came in 1846, when Queen Victoria and Prince Albert toured the works on their progress through Cornwall. The owners promptly renamed the operation the Royal Restormel Iron Mine and rebranded it as a royal industrial showpiece. At its peak the mine employed 120 people, produced 4,500 tons of ore a year, and ran a horse-drawn tramway from pit to quay to load onto coastal ships. It closed in 1883 when imported ore made Cornish workings uneconomic, and the workshops that built Brunel's Cornwall Railway were eventually converted into apartments in 2004.

Lostwithiel's slow demotion is a story in itself. Once the most important town in the duchy, it gradually surrendered its functions to Bodmin, Truro, and St Austell. By the time Victorian reformers gave it a municipal borough in 1885, the population was too small to support proper local government. In 1968 the place was reduced to a rural borough, then in 1974 to a parish council that took the slightly grand title of town council. Through every reorganization, the mayor kept the silver oar. The borough seal still showed a castle rising from water flanked by thistles, with two fish in the stream and the Latin legend Sigillum burgi de Lostwithyel et Penknight in Cornubia. Coulson Park bears the name of Nathaniel Coulson, a San Francisco property magnate raised in Lostwithiel after his father abandoned him here. He never forgot the town that took him in.

Walk Lostwithiel today and the medieval grid still organizes the place. Fore Street follows the same line the Earls of Cornwall set out, ending at the bridge where the river runs fast and clear under those six pointed arches. The Guildhall, built in 1740, houses the local museum on an arcaded ground floor that still echoes the cattle markets it once sheltered. Edgcumbe House, where the council now meets, dates to the 16th century in its rear wing. The annual calendar follows old rhythms: an arts and crafts festival in spring, a beer festival, a summer carnival, food and cider festivals in October, and a Dickensian evening in December when Fore Street fills with costumed locals and gaslight effects. Andy Mackay of Roxy Music was born here. The town is twinned with Pleyber-Christ in Brittany, a Celtic cousin across the water.