Lilongwe had existed for centuries as a small fishing village on the banks of the Lilongwe River. During British Colonial Rule, the settlement became an administrative center due to its strategic location. Formally founded in 1906 as a trading post, Lilongwe was officially recognized as a town in 1947.

 After gaining independence, it increasingly developed into an important trading center in Malawi's central region. Its growth was encouraged when the country's former head of state, Hastings Kamuzu Banda, established it as Malawi's new capital city in 1975. The last government offices have been relocated to Lilongwe in 2005. The city's population is increasing rapidly, with an annual growth rate of 4.3%.

Lilongwe is divided into a New and Old City. The former hosts hotels, embassies, governmental institutions and offices while the latter has markets, bus stations, cafes and restaurants. The modern shops of the City are contrasted by the street and walled markets of Old Town.

While Blantyre is the commercial Capital of Malawi, Lilongwe's economy is dominated by the government and public institutions. Kanengo District in the north of the city is the main industrial area, where food processing, tobacco storage and sales, maize storage and other light industries take place. Finance, banking, retail trade, construction, transport, public administration, tourism, and tobacco manufacturing are the main economic activities in the city. 

76 percent of Lilongwe's population live in informal settlements, while poverty stands at 25 percent and unemployment at 16 percent.The civil service employs about 27 percent of all formal workers, while 40 percent work in the private sector and 2 percent are self-employed.