Lyss is first mentioned in 1009 as Lissa.
The oldest traces of humans in Lyss include neolithic, Bronze Age and Hallstatt culture items scattered around the municipality. One of the best preserved items in a 6th-century BC Etruscan bronze statue. Roman era bricks have been found in Kirchhubeli along with early medieval and medieval tombs and the remains of a Carolingian church. A number of graves dating from the 7th Century were discovered at Sonnhalde-Kreuzhohe.
The Ministerialis (unfree knights in the service of a feudal overlord) family of Lyss is first mentioned in 1185-87 under the Counts of Neuchatel-Aarberg. In 1367, Lyss, along with the rest of the land around Aarberg, was transferred to the Counts of Neuchatel-Nidau. About ten years later, around 1377-79 it was transferred again to the City of Bern and became part of the Bernese bailiwick of Aarberg. While Bern owned the village of Lyss, a number of nobles and monasteries owned property, farms or rights in the village and surroundings.
Until the Reformation, Lyss had two parish churches. The church of St. John the Evangelist was built in the 7th or 8th century. Around 1246 it was replaced with a new church, which was partially renovated in the 15th century. It became the center of an important deanery in the second half of the 14th century. After the Reformation it was the only church in Lyss until the current Reformed church was built in 1934-35. The other church St. Marys Church at Kirchhubeli which was built on the foundations of a Carolingian church. In the 15th century the church began to fall into disrepair, and during the Reformation it was abandoned and demolished in 1533.
For centuries, the meandering Aare and Lyssbach rivers flooded Lyss repeatedly. Over the centuries several dams and levees were built to protect the village. Starting in the 17th century a number of water powered mills, including an oil mill, sawmills, fulling mills and dyeing factories, were built along the river. The first Jura water correction (1868–91) diverted the Aare river into Lake Biel. This, together with the Lyssbach correction (1911–16) opened up extensive farm land along the old river.
The population of Lyss was always greater than in the nearby political and administrative center of Aarberg. However, because of Aarbergs central location and convenient roads Lyss remained a quiet, isolated town. The arrival of the railroad from Bern to Biel in 1864 and the Jura water correction led to extensive population growth. In 1876, another railway line from Lausanne to Solothurn was built through Lyss. This made the town a rail hub. Built in 1983-86 the Bern-Biel/Bienne highway passed through Lyss and brought increased traffic.
In 1866 the Kaserei- und Kreditgesellschaft Lyss (Dairy and Credit Society of Lyss) was founded as a bank to help farmers. By 1880 it had grown into a savings and loan bank which helped fund the expansion of Lyss. With the new rail links, factories began to settle in the town. By 1900 there were factories manufacturing watches, cement products, biscuits, watch crystals, fittings, bricks, cloth and steel. Heavy machinery factories moved in by 1940. The town expanded in 1956 and again in 1979 as businesses and residents moved into Lyss. In 2005 there were 6,035 jobs in a town of about 10,000 people.
Lyss has an area of 14.83 km2 (5.73 sq mi). Of this area, 3.56 km2 (1.37 sq mi) or 30.2% is used for agricultural purposes, while 3.98 km2 (1.54 sq mi) or 33.8% is forested. Of the rest of the land, 4.19 km2 (1.62 sq mi) or 35.6% is settled (buildings or roads), 0.05 km2 (12 acres) or 0.4% is either rivers or lakes.
Of the built up area, industrial buildings made up 6.4% of the total area while housing and buildings made up 14.0% and transportation infrastructure made up 9.6%. Power and water infrastructure as well as other special developed areas made up 2.5% of the area while parks, green belts and sports fields made up 3.1%. Out of the forested land, all of the forested land area is covered with heavy forests. Of the agricultural land, 21.5% is used for growing crops and 7.2% is pastures, while 1.5% is used for orchards or vine crops. All the water in the municipality is flowing water.
The municipality is an administrative and economic center for the surrounding region. Lyss is located at the mouth of the Lyssbach valley on the former right bank of the Aare river. It consists of the village of Lyss and village sections of Hardern and Eigenacker. Until 1876 it included the settlement of Werdthof, which is now part of Kappelen.
Lyss lies on the eastern edge of a wide valley that extends southwest to Lake Murten. West of this valley lie Lake Neuchatel and Lake Biel, and beyond that the Jura mountains.
The valley is flat and was subject to flooding until 1878, when a major hydraulic engineering project changed the courses of the Aare and the Zihl and lowered the level of the three lakes by 2.5 meters (8.2 ft). In addition, water from the Aare, the Broye, the Zihl, and the Schuss was diverted into the Nidau-Buren Canal and the Hagneck Canal.
As of 2010, Lyss had an unemployment rate of 2.5%. As of 2008, there were 54 people employed in the primary economic sector and about 20 businesses involved in this sector. 3,194 people were employed in the secondary sector and there were 153 businesses in this sector. 3,761 people were employed in the tertiary sector, with 505 businesses in this sector.