Presumably as a Frankish settlement in the shadow of a rampart castle built around 800, Neheim is first mentioned in documents around 1202. The town is fortified by the Arnsberg counts, reduced to rubble by the Cologne electors, rebuilt and receives Lippe town rights in 1358. The annual "Donatorenfeier" commemorates the donation of a forest to the town by the last Arnsberg count in 1368. After the great town fire of 1807, Neheim was almost completely rebuilt. The Burgstraße with its Burgmannshöfe and the Gransauplatz still bear witness to the town's lively past.

Today, Neheim is the most modern shopping center in the region with its compact, lively business and gastronomy area. The centerpiece is the pedestrian zone around the Neheim market with the striking "Sauerland Cathedral".