Bajina Bašta was established on the remains of the Turkish settlement of Pljeskovo which was situated on the right bank of the Drina River between the confluence of the Rača and Pilica Rivers, under the eastern foothills of Tara Mountain. Under the pressure of Serbian authorities, the Turks were pushed from this region directly across the Drina into Bosnia, where Turks started to build houses in the villages of Skelani and Dobrak.

The name Bajina Bašta comes from the large garden, fruit and vegetable farm of the famous Turkish feudal owner, Baja Osman after whom the settlement got its name. Bajina Bašta literally means "Baja’s Garden". In 1858 the settlement was declared as an administrative center of Rača District. The town received its official status in 1872 by the ordinance (ruling) of Prince Milan Obrenović. Ten years later, the town got its urban plan.

The Rača’s region primarily becomes a part of Sokolska nahija (region), in other words a part of Zvornik’s Sandzak (region), and later on a part of Užice nahija where it remains until its liberation from the Turks in 1834. Later on, this town belonged to the Užice District, canton, region and today again to Zlatibor District. In 1875 a mixed handicraft guild was established with 88 different occupations, based on forestry and stock farming. In attempts to improve trade links between Serbia and Bosnia, in 1880, the first custom point was opened in Skelani. In 1926, a metal bridge was built, replacing the ferry that crossed the river. In 1940, the downtown area built its first water piping and sewerage system. During World War II, Bajina Bašta was severely damaged. The city was liberated from Nazi forces on September 12, 1944.

Bajina Bašta has continued to develop into an economical, cultural and administrative center of the Bajina Bašta Municipality which encompasses 672 km2 (418 miles2), today having 29,747 inhabitants, of which 8,555 live in the urban centers. Intensive industrial development began in 1966 when the Bajina Bašta Hydroelectric Power Plant in Perućac went into operation. This is the second largest hydroelectric power plant in Serbia and Montenegro today after Djerdap on the Danube River. The hydroelectric plant consists of two retention lakes Lake Peruć and Lake Zaovine, which has the unique characteristics of being located 9 km away and 800 km above the actual dam itself, at the top of the nearby mountains.

The expansion and development of Bajina Bašta by modern urbanization plan was directed along the main streets which represent a part of the main routes to Užice – Perućac (Kneza Milana Obrenovica Street) and Rogačica – Tara (Svetosavska Street), which intersect in the town’s center, where the rest of the town’s streets link. Bajina Bašta is considered a modern urban settlement with a potential for horizontal expansion. Downtown represents the residential area with buildings of different facades and height.