The words were written in 1915 as a poem of three verses by Hans Leip (1893–1983), a school Teacher from Hamburg who had been conscripted into the Imperial German Army. Leip reportedly combined the nickname of his friend's girlfriend, Lili, with the name of another friend, Marleen, who was a nurse. The poem was later published in 1937 as "Das Lied eines jungen Soldaten auf der Wacht" ("The Song of a Young Soldier on Watch"), with two further verses added.

It was set to music by Norbert Schultze in 1938 and recorded by Lale Andersen for the first time in 1939. In early 1942 she recorded the song in English, the lyrics translated by Norman Baillie-Stewart, a turncoat former British army officer working for German propaganda . Song Writer Tommie Connor also wrote English lyrics with the title "Lily of the Lamplight" in 1944.

After the occupation of Belgrade in 1941, Radio Belgrade became the German forces' radio station under the name of Soldatensender Belgrad (Soldiers' Radio Belgrade), with transmissions heard throughout Europe and the Mediterranean.

Many Allied Soldiers made a point of listening to the song at the end of the day. For Example, in his memoir Eastern Approaches, Fitzroy Maclean describes the song's effect in the spring of 1942 during the Western Desert Campaign: "Husky, sensuous, nostalgic, sugar-sweet, her voice seemed to reach out to you, as she lingered over the catchy tune, the sickly sentimental words. Belgrade... The continent of Europe seemed a long way away. I wondered when I would see it again and what it would be like by the time we got there."

Humphrey Jennings directed the 29-minute-long film The True Story of Lili Marlene in 1944 about the song.

List of personnel for the original 1945 single.

Other artists who recorded the song included Hildegarde (on Decca), Bing Crosby (recorded December 30, 1947), Martha Tilton (on Coral), and Vaughn Monroe (on V-Disc). Al Martino revived the song for Capitol Records in 1968. Another version was recorded in the 1960s by Hank Locklin, Connie Francis and Vera Lynn. A German version of the song also covered by Edith 'Lolita' Zuser. An instrumental version was also covered by Billy Vaughn. Hank Snow also recorded a version in 1963 on his album "I've Been Everywhere". Another French singer, Patricia Kaas used "Lili Marlene" as an intro for her song "D'Allemagne" and sang the entire song during concerts in the 1990s. Matia Bazar (Italy) recorded an uptempo beat song called "Lili Marleen" on her 1982 album Berlino, Parigi, Londra. The song is a "spoken words" early 1980s dance track. Spanish group Olé Olé, led by Marta Sánchez, released an electro-pop version of the song in 1985. It became one of the best-selling singles in Spain of the 1980s, and paved way for the singer to have a successful career. The song was eventually included in the also best-selling album Bailando sin salir de casa in 1986. German blackmetal band Eisregen recorded a version of "Lili Marlene" on their album Hexenhaus. The German Gothic metal/Industrial metal band Atrocity released the song in both languages (English & German) on Gemini: on the blue edition was the German version, and on the red edition was the English version. Kid Creole and the Coconuts included an uptempo, disco-influenced version of "Lili Marlene", with German lyrics sung by Coconut Adriana Kaegi, on their 1980 debut LP release Off the Coast of Me. Carly Simon recorded the song as the third track on her 1997 Arista CD Film Noir. It has also been translated into Hawaiian by Kiope Raymond, and recorded by Raymond and Pearl Rose on Rose's 2000 album Homecoming. Most recently it was recorded by Neil Hannon of the Irish pop group The Divine Comedy as a B-side to the 2006 single "A Lady of a Certain Age". A slow-tempo instrumental version can be found on the compilation LP, Vienna: City of Dreams, by the Austrian zither master Anton Karas. "Lili Marlene" has been adopted as the regimental slow march by the Special Air Service, Special Air Service Regiment and Princess Patricia's Canadian Light Infantry, and its melody is the basis of the official march of Kodam III/Siliwangi in the Indonesian Army.

Original issuing of the song by Decca Records in the US and Brunswick Records in the UK was on 10". Decca re-issued the single on 7" during the 1950s and early 1970s. This is also the version of the single that was reissued by MCA in 1978 and 1980 on 7".

While touring the world in live one-woman cabaret shows from 1953 to 1975, the song was part of Dietrich's usual line-up, usually following "Falling in Love Again". She always introduced the song with some variation of this quote, from a 1960s concert, somewhere in Europe:

Released in 1959 by Philips Records in association with Columbia Records on 7" in the Netherlands, it was intended as an abridged extended play version of an internationally released compilation album of the same name, consisting of songs sung in German by Dietrich.

American entertainer Connie Francis recorded "Lili Marlene" on 3 June 1961. She recorded the single's B-side, "Mond von Mexico", on 5 October 1961. Both songs were recorded in Vienna, Austria at the Austrophon Studio. The single was released in 1962, marking her seventh single in German. Francis also recorded the song in Italian and French. Her version of "Lili Marleen" peaked at number 9 on the German music charts.

Released in 1962 by EMI Italiana on 7" in Italy.

Most likely re-issued in the 1970s, it was originally released in the Netherlands on 7" by Brunswick Records. This version of the single was re-issued again in the UK in 1989, and in 1992 it was issued in Germany, both by MCA, the 1989 re-issue also having been released by Old Gold Records.

The song is referenced by Leonard Cohen in his 1971 released song, Famous Blue Raincoat. Spanish singer Marta Sánchez sung a Spanish version both soloist singer and with her band Olé Olé.

The song's popularity among both Allied and Axis troops in the Western Desert front during World War Two was described in the British television program The World at War, a signal documentary series broadcast in 1973-74 and narrated by Sir Laurence Olivier, in Episode 8, "The Desert: North Africa 1940-1943".

Dietrich sang "Lili Marlene" in her television special An Evening with Marlene Dietrich, which aired on the BBC in the UK and on CBS in the US in 1973, and was featured on four of her six original albums. She also recorded and performed it in both the original German version and the English adaptation. Both versions have appeared on countless compilation albums worldwide, several of them titled after the song. After 5 shows in Japan, between 15th to 25th December 1974, two singles of the song were released by both EMI and MCA Records in 1975. The MCA Records release (D-1284) peaked #93 in the Oricon charts and spend three weeks there, and sold a total of 8,000 copies, this version has Falling in Love Again as a B-side. The EMI release (EMR-10761) peaked #42 in the charts and spend 11 weeks in it, selling a total of 56,000 in the country, this version has Die Antwort Weiss Ganz Allein Der Wind (Blowin' In The Wind) as a B-side.

Lear performed "Lili Marleen" in the 1978 Italian film Zio Adolfo in arte Führer.

Rainer Werner Fassbinder directed the 1980 film Lili Marleen, the story of Lale Andersen and her version of the song.

In the 1983 film The Right Stuff, a group of German rocket Scientists working for NASA sing the song around a piano in a bar the night before one of the space flights.

The song appears several times during the World War II-themed 1988-1989 television miniseries War and Remembrance. On the Allied side, it is played during a party attended by some of the British and American characters, prompting the British Journalist Philip Rule to sarcastically lament that the only memorable song to come out of the war would be "a cheap Hun ballad." On the German side, the SS men riding on the train taking the last Theresienstadt Jews to Auschwitz slowly sing it.

Estonian punk rock band Vennaskond released an Estonian version of the song on their album Usk. Lootus. Armastus. in 1993. Another Estonian group, Swing Swindlers, recorded a melancholy swinging version in 2007 (both in German and Estonian) and featured the song in their film Berlin 1945: Musik Unter Bomben with vocals by Mart Sander, Kelli Uustani, Nele-Liis Vaiksoo and Pirjo Levandi.

In 2006, Bear Family Records released a 7-CD set Lili Marleen an allen Fronten ("Lili Marleen on all Fronts"), including nearly 200 versions of "Lili Marleen" with a 180-page booklet. (ISBN 3-89916-154-8).

British singer-songwriter Katy Carr featured this song in English on her album Coquette (2009).

Dutch folk band Omnia recorded a version of the song on their 2011 album Musick and Poëtree.