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Ilidža is one of the longest continuously inhabited regions in Bosnia and Herzegovina. Since the 19th century, numerous archeological finds have been made in the Butmir area, dating from Neolithic times. The so-called Butmir culture, is one of the best documented Neolithic cultures in Europe of the 26th and 25th centuries BC

During the medieval period, the Ilidža area was part of the Bosnian province of Vrhbosna. Katera, one of the two original Bosnian towns mentioned by Constantine Porphyrogenitus in De Administrando Imperio, was found on the ground of today's Ilidža municipality. The disciples of Saint Cyril and Saint Methodius considered the area important enough to stop at Vrelo Bosne and build a church in the area.

Numerous elements of Turkish culture found their way into Ilidža, such as a number of oriental homes from the 15th and 16th centuries that have survived to this day. Numerous mosques and bridges were also built at this time.Ilidža, like the rest of Bosnia, experienced industrialisation and westernisation with the coming of Austria-Hungary.

When, under the terms of the Accord, Ilidža was placed within the territory of the Bosnian Federation, the vast majority of Serbs fled the city to live in the Republika Srpska, destroying some buildings as they did so. In the process NATO and EU observers reported about violence between those Serbs who decided to leave and ones who wanted to stay, as those who were leaving looted and set on fire not just their but also houses and property of those who were staying as well.

During Roman times, the Ilidža area was the location of the town known as Aquae Sulphurae. This was a Roman colony, and the largest settlement in the whole of Bosnia and Herzegovina at the time. Today numerous traces of Roman civilisation have been found, such as mosaics, ceramics, jewelry, coins, and even structural remains.

The modern town of Ilidža as we know it was founded during the Ottoman rule of Bosnia. Its name derives from the Turkish word Ilıca, meaning "warm thermal springs". (Ilıca is also the name of a district of Erzurum, a southeast city of Turkey. There are also Ilıca-named municipalities in the following provinces of Turkey: Samsun, Kahramanmaraş, Antalya, Malatya, Ordu.)

A railway station and tracks, hotels, and various other structures made Ilidža the most important town after Sarajevo in the region. This continued into the 1900s as Ilidža continued to grow and develop.Before 1990, Ilidža was populated mainly by Serbs 47,21% and Bosniaks 31,58% . When war started in 1992 until the 1995 Dayton Peace Accord the municipality was divided between Bosnian Muslims (Hrasnica, Sokolovic Kolonija, Butmir) and Serb (Ilidža, Kotorac, Vojokovici, Grlica) parts.

From 1996, Ilidža was home to the headquarters of the NATO peacekeeping force IFOR (later SFOR and EUFOR) before its move to nearby Butmir in the year 2000. During this period, the hotels Terme, Srbija (Serbia), Bosna (Bosnia) and Jadran were barricaded and the area used as NATO HQ. Today Ilidža remains a bustling, largely Bosniak-dominated town. Vojkovici and Grlica formed Eastern Ilidza Municipality which is dominated by Serbs.