Lignano Sabbiadoro developed in the early 20th century from some hospitality resorts, which at the beginning could be reached only by sea. The first inhabitants came in 1931, after the draining of the nearby marshes. The first road connecting Lignano with the nearby comune of Latisana was built in 1926.

Formerly known as simply Lignano, the name Sabbiadoro (from sabbia d'oro "golden sand") was added in 1935 for promotional reasons.

It is divided into three zones, each with its own particular traits: the historic centre, rife with shops and restaurants (Lignano Sabbiadoro itself); the greener area of Lignano Pineta, with lovely gardens and lanes for strolling; and Lignano Riviera, the waterfront, rich in salty sea air and coastal pines.

During World War II, the final operations of the German navy - involving the evacuation of troops and personnel from Istria and Trieste ahead the advancing Yugoslavs - took place here in May 1945. An estimated enemy force of 4000 landed from 26 ships of all types at the mouth of the Tagliamento River. Germans equipment included E-boats, LSTs, a small hospital ship, all types of transport, and a variety of weapons. The 21st Battalion of the New Zealand 2nd Division was outnumbered by 20 to one, but at the end, on 4 May 1945, the Germans surrendered. Lignano became an autonomous commune in 1959. Lignano lives on summertime tourism, and is home to Austrian, German, and Slovenian citizens.

In the late 2010s to early 2020s the town gained popularity on the Internet because of the satirical YouTube channel Cartoni Morti starring the recurring character of "il Sindaco di Lignano" ("the Mayor of Lignano").