Debre Berhan was founded by Emperor Zara Yaqob, in response to a miraculous light that was seen in the sky at the time. Believing this was a sign from God showing his approval for the death by stoning of a group of heretics 38 days before, the emperor ordered a church built on the site, and later constructed an extensive palace nearby, and a second church, dedicated to Saint Cyriacus. Zara Yaqob spent 12 of the last 14 years of his life in Debre Berhan.
Historian Richard Pankhurst offers the date of 1456 for the date of the founding of this church, providing a plausible argument that the light in the sky was Halley's Comet, which could have been in Shewa that year, although the traditional dates (10th day of the month of Maggabit, i.e. 6 or 7 March) do not coincide with the days that the comet was most visible (13 through 17 June).
While his son Baeda Maryam did spend the first part of his reign in Debre Berhan, eventually Baeda Maryam returned to the established itinerant practice of living in a permanent encampment that was constantly on the move through the realm. The departure of the court led to a decline in the population and importance of this town. Pankhurst explains that the needs of the imperial court and army—who numbered in the thousands—for firewood and food was so burdensome that, "it could not remain in any one locality for more than four months, nor return to the same place in less than 10 years due to the resultant shortage of food", which prevented the growth of any capital city in this period.
While little more than a large village, Debre Berhan is mentioned a few times in the 16th century, the first time as a mustering center by Emperor Lebna Dengel against the invading armies of Ahmad Gragn. After he had defeated Lebna Dengel at the Battle of Amba Sel, Ahmad mustered his troops twice in Debre Berhan before leading them on campaigns deeper into Ethiopian territory. At the second mustering in 1535, he proclaimed before his followers, "Thanks be to God, Abyssinia is conquered. Only Tigray, Begemder and Gojjam are left... Shall we march against them, or shall we stay on in this region for a year until we have settled it down?" then led them into the Ethiopian highlands.
The village regained importance in the reign of Asfa Wossen (1775-1808), Meridazmach of Shewa, who built a palace there, and divided his time amongst this town, Ankober and Angolalla. The succeeding Meridazmaches prized Debre Berhan as a hunting lodge for its surrounding plains, and used it as a riding place. His son Sahle Selassie rebuilt Debre Berhan after it had been ravaged by Abichu Oromo at the beginning of his reign, and built a church dedicated to the Selassie ("Trinity") in this capital.
When then Negus Menelik submitted to Emperor Yohannes IV in the treaty of Wadara of 1878, it was also stipulated that the capital of Shewa would be moved from Liche to Debre Berhan.
The Debre Berhan market in the 1880s was considered important for mules and horses. The Selassie church was rebuilt by Emperor Menilek in 1906 and contains many mural paintings. David Buxton believes that it was inevitable that Debre Berhan would regain importance, "Although a somewhat cold and inhospitable place," he writes about the town, "it has an obvious advantage as commanding what must always have been an important focus of routes. Even in modern times it was inevitable that the Asmara road should be brought through this easy passage, avoiding the impassable gorges on the other."
Debre Berhan received electricity in 1955 when a 90 kW hydro-electric power station was put into service; by 1965, the installed electrical capacity in the town was 125 kVA and annual production 103,000 kWh. On 26 April 1957, Emperor Haile Selassie opened the Community Teacher Training School in the town. By 1958 it was one of 27 places in Ethiopia ranked as First Class Township.
On 2 July 1994 it was broadcast that nine people were killed and eleven captured in an exchange of fire with security forces in Asagirt woreda. The people were alleged to have broken into the Debre Berhan prison before that, setting a number of prisoners free. According to the police, Andale Melaklu, the Debre Berhan representative of the All-Amhara People's Organization was one of the "bandits" killed in the fire exchange.