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The town was laid out by Raymond Unwin as a demonstration of the principles established by Ebenezer Howard who sought to create an alternative to the industrial city by combining the best of town and country living.It is also home to the United Kingdom's first roundabout, which was built in 1909.Letchworth was a relatively small parish, having a population in 1801 of 67, rising to 96 by 1901.

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This did not stop the town having a "pub" however – the Skittles Inn or the "pub with no beer" which opened as early as 1907.

Despite the ban it is not entirely true to say that there were no pubs in the Garden City.

Pubs that had existed from before the foundation of the Garden City continued – including the Three Horseshoes in Norton, The George IV on the borders with Baldock, and the Three Horseshoes and The Fox in Willian – continued to operate (as they do to this day), and undoubtedly benefited from the lack of alcohol to be had in the centre of the town, as did the pubs in neighbouring Hitchin and Baldock.

New inns also sprang up on the borders of the town, one such example being the Wilbury Hotel which was just outside the town's border.

At one time the "Tab" as it was known had occupancy of over 30 factories in Icknield Way (the original pre-Roman Road), Works Road and finally in Blackhorse Road.

Blackhorse Road was built on what was the continuation of the original "Icknield Way".

As one of the world's first new towns and the first garden city it had great influence on future town planning and the New towns movement; it influenced Welwyn Garden City, which used a similar approach and inspired other projects around the world including Canberra, the Australian capital, Hellerau, Germany, small village of Tapanila, Finland, and Mežaparks in Latvia.) There is a link to town planning in the Soviet Union Stalingrad through the architect Semionov and a curious, possible if improbable, account of Lenin visiting the town when he visited England for a congress of the Russian Bolshevik party, then banned in Russia.

The village was located along the road now called Letchworth Lane, stretching from St Mary's and the adjoining medieval manor house (now Letchworth Hall Hotel) up to the crossroads of Letchworth Lane, Hitchin Road, Baldock Road and Spring Road, where there was a post office.

Industry would be kept separate from residential areas—such zoning was a new idea at the time—and trees and open spaces would prevail everywhere.

His ideas were mocked in the press but struck a chord with many, especially members of the Arts and Crafts movement and the Quakers.

Letchworth had a very diverse light industry, including K & L Steel Foundry, often a target for German bombers in World War II, the Letchworth Parachute Factory, J M Dent and Son (also known as The Aldine Press, Garden City Press).

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