The first significant traces about the existence of the settlement at the territory of today's Mrkonjic Grad lead to the period of the Roman Empire. One of the most important Roman highways (Salona-Servitium), which used to connect the Adriatic sea with the Sava river and Panonija , stretched through this region (Mliništa-Pecka- Štrbina-Podrašnica-Rogolji-Busija-Jovana voda-Trijebovo-Hanovi-Bočac). There were some more roads that stretched towards Šipovo, Kotor and Jezero. The settlement ,,LEUSABA'' was the crossroad of those roads and that quarter  ,,LEUSABA'' was situated in the foothill of the Grabez's place where the city of Mrkonjic –Grad was built. 

Integration of the population from Majdan and Oćune brought an increased number of people and  together with ancient settlement called Varcar, a New Town (Tur. Jendže Ksaba) began to settle the region. Ever since then , the settlement went through the rapid development spreading around this area until today. The city went through a great rebirth in 1593 when the Djukanović family built their endowment (Vakuf) at the very place of Kolobara ( it is the place where the monument of the King Peter I of Serbia is situated today), futher more The Djukanović family built the mosque, 24 stores, the water system, bakery, library and they also improved the trade and commerce.

As a result of establishing Vakuf's endowment the city got its name Varcar's Vakuf and finally Varcar Vakuf. This name was kept until 1924 when the city finally got its name Mrkonjić Grad. In order to show its gratefulness, the city built the monument dedicated to the King Peter I of Serbia because he participated in the first Bosnian rebellion against the Turks. In addition to the fact that the city already bears the King Peter's name, the population built him the monument that was destroyed and built  for several times.

The first ZAVNOBiH (The State Anti-fascist Council for the National Liberation of Bosnia and Herzegovina) session took place in Mrkonjić Grad on 25 November 1943 and it is one of the most important dates in the history of the town. The National Anti-Fascist Council of the People's Liberation of Bosnia and Herzegovina was formed on 25 November 1943, under the administrative umbrella organization of the Yugoslav Partisans, AVNOJ and declared Bosnia and Herzegovina to be an equal community of Muslims (Bosniaks), Serbs, and Croats.

The post-war period significantly left its traces in the municipality when it comes to all segments of economic and social development. The city and villages got electricity, numerous roads were built, the city also got the water system, school, library, museum, hospital, theatre and a fashionable hotel. There were also established some new working organisations which eventually turned into factories: Metalac Bolt Factory (400 workers), Manjača (380 workers), Lisina ( 260 workers),  and Mladost (1100 workers).

The first high school was found in 1961 and it was called the gymnasium.  During the last war (1992-1995) the town went through the oppressive  tyranny bringing along the disastrous consequences. The town's  demographic structure suffered significant changes but still, after the inhabitants had returned to their  town it started to look the way it looked before and there is still a lot to be done in order to bring back an old glow.