The town of Buda sprang up along the route of the International-Great Northern Railroad, which was extended from Austin to San Antonio in 1880. Buda bore the name of "Du Pre" from its birth in 1881 until the autumn of 1887, when postal officials became aware that another Texas town was also named Du Pre.
Cornelia Trimble platted the town of Du Pre on April 1, 1881, establishing streets and a 150-foot (46 m) wide "Reservation" between the lots and the railroad right of way, which allowed the railroad to place buildings on the parkland, including the depot that would become the lifeblood of the town over the next few decades. Several businesses sprang up, including the Carrington Hotel, which served meals to railroad travelers.
By the time Du Pre found a new name for itself, the Carrington hotel was known as the "Buda House". The "Dupre Notes" column of the Sept. 25, 1886, edition of the Hays County Times and Farmer's Journal notes that "The Buda House is one of the best hotels in the state. The polite and entertaining hostess, Mrs. Carrington, meets all with a courteous welcome." According to the town's oral tradition, "Buda" is a corruption of the Spanish word viuda, or "widow", referencing the widows who supposedly worked as cooks at the Carrington Hotel. Others suggest that like the town of Buda, Illinois, the town name is a nod to the exiles of the failed Hungarian Revolution of 1848 who settled in the area. Buda was incorporated in 1948. By the mid-1980s it had attracted a cement plant and some craft industry.