Kyle was founded in 1880 by David E. Moore and Fergus Kyle, for whom the town was named. The townsite was founded due to its proximity to the International Great-Northern Railroad, and lots were sold at auction under a Live Oak tree (the Kyle Auction Oak) which still exists today.
In the early 20th century, Kyle became a popular destination for tourists due to its proximity to the Texas Hill Country. The town was also home to a number of artists and writers, including Pulitzer Prize-winning author Katherine Anne Porter.
Kyle officially became the "Pie Capital of Texas" in June of 2021. In addition to all varieties of the edible version, visitors can also enjoy the Pie Capital of Texas when they attend the city's signature annual event - The Pie in the Sky Hot Air Balloon Festival - that happens each Labor Day weekend.