Villedieu owes its name to the religious order Knights Hospitaller, that later became the Knights of Malta. Henry I, King of England and Duke of Normandy, granted Villedieu to this order in the 12th century. Low taxes and good administration attracted people to Villedieu. Advanced coppersmithing technology was presumably imported from the Middle East by the Knights. By the early 14th century, the Corporation of the Coppersmiths of Villedieu was officially recognized by the Kings of France.

In the years following the French Revolution, in the late 18th century, the people of Villedieu were strong supporters of the Revolution, unlike most of people in the surrounding area. A major reason of their support is that the Revolution abolished customs duties between French regions; before the Revolution, copper pans exported from Villedieu to Brittany, 50 km (31 mi) away, faced higher import duties than copper pans from Portugal. After a losing battle with Chouan troops, the men from Villedieu escaped thanks to their women who threw stones, flowerpots and chamber pots from second-story windows at the pursuing Chouans. The general heading the Chouan troops was getting ready to bombard Villedieu and set it on fire. A delegation of women negotiated with him: the inhabitants were given a short time to hide their valuables and the Chouan soldiers then plundered the town for food and clothing.

In 1944, when the Germans withdrew from Villedieu, they left a sniper who shot some of the first US soldiers to enter Villedieu, before being neutralized. The US commander was about to request airplane bombing runs when the mayor approached him, told him that there were no Germans left in Villedieu and offered to ride through Villedieu in the front seat of a US jeep. Villedieu was thus one of the few towns in the region to escape major destruction.

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