In January 1873, Lampasas County Sheriff S.T. Denson was shot while attempting to arrest brothers Mark and Wash Short for drunken and rowdy behavior. The Shorts escaped. The district judge sent a posse to track down the fugitives, but a local militia group (including members of the notorious Horrell gang) turned the men back. As a result of the fracas, Texas Governor Edmund J. Davis issued a proclamation banning sidearms within Lampasas, and sent Captain Thomas Williams and a group of Texas State Policemen to town to enforce the law. Immediately upon arriving, the police arrested a Horrell associate for carrying a weapon, but the man convinced the officers to enter a local saloon, where the Horrell gang was waiting. A gunfight erupted, resulting in the deaths of Captain Williams and some of his officers.
More police were dispatched to Lampasas, along with lawmen from neighboring towns, and a massive manhunt ensued. Four men were eventually arrested and jailed, but the gang attacked the prison and freed Mart Horrell and Jerry Scott, the owner of the saloon where the gang had laid in ambush. The Short brothers fled to New Mexico. Mark Short was later arrested in North Texas and returned to Lampasas to stand trial for his part in the assault of Sheriff Denson, but he never faced legal justice. Sam Denson, the son of the former sheriff, shot him dead in a local saloon.
Prior to the events of 1873, Lampasas had been granted an exemption from Texas laws banning firearms in town, because of the need of frontier settlers to protect themselves from Indian tribes that posed a threat at that time. These events effectively ended that exemption, and brought Lampasas under the sway of state gun control laws for the first time in its history.
Originally named for town founder John Burleson, a Texas revolutionary soldier, Lampasas was officially incorporated in 1883.