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Knottingley means "the clearing of Cnotta's people", from the Old English personal name Cnotta meaning "knot", describing a small, round man and -ingas "people of" + leah "wood, modern lee, not the same meaning as Leah (personal name)". The name was recorded as Cnotinesleahemm in 1128.

During the three Sieges of Pontefract Castle, Oliver Cromwell took residence in the town of Knottingley, believed to be in Wildbore House. The house was later demolished when its land was mined as a quarry for the limestone underneath.

Until 1699, it was an important inland river port but, in that year, the Aire was made navigable as far as Leeds, which soon surpassed it. Knottingley continued as a centre for boat building into the 20th century. In the late 19th century, it started glass manufacturing. The town is served by Knottingley railway station.

After 1870, the town became known for glass manufacturing. In 1887 Bagley's Glassworks purchased the rights to the first bottle-making machine, invented by a Ferrybridge postmaster. There is a Bagley's Glass gallery in Pontefract Museum.

Close to Knottingley was the Ferrybridge Power Station, which had the largest cooling towers of their kind in Europe. Three of these towers collapsed in high winds in 1965. These towers can be seen for miles around. One of the oldest purpose-built cinemas in England, located in Aire Street, has been converted into flats.

The town was the last in the United Kingdom to have a working deep coal mine, Kellingley Colliery, until it closed in December 2015.