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The settlement was first mentioned in 1364 as Kostricz, a place of Slavic foundation. There has been a castle since the middle of the 13th century. The city has emerged from two medieval manors.
Within the German Empire (1871–1918), Köstritz was part of the Principality of Reuss-Gera. Köstritz Castle, a four-winged building around a courtyard built between 1687 and 1704, was the seat of a side wing of the ruling House of Reuss, named counts and (from 1806) princes Reuss-Köstritz. The castle was demolished in 1972 under the government of East Germany, with only the gatehouse left. Today, a modern hotel has been built on the site. In January 2023 Bad Köstritz absorbed the former municipality Hartmannsdorf.[3]
