The Village of Frutillar was officially founded by order of the President of the Republic, Manuel Montt, on November 23rd 1856, a little over a year after the first 47 families of German colonists to arrive in the country had established themselves here.

The first families of German colonists, among whom were Wilhelm Kuschel, Heinrich Kuschel, Theodor Niklitschek, Christian Nannig, Christian Winckler, and Adam Schmidt, soon began to use the farms measured out by José Decher. From the first they displayed a spirit of hard work, effort and enthusiasm, qualities which are still to be found today among their descendents.

These first residents chose to construct their houses on the slopes of the neighboring hills, due to the marshy nature of the ground around the lake. They devoted themselves to farming the land, although there was no lack of activities of a more industrial type, such as a mill, a distillery and a tannery, as well as a few stores, which sold foodstuffs and a range of implements.
At that time, Frutillar was an important lake port, the only route between Melipulli, (now Puerto Montt) and the city of Osorno. This contributed to its rapid growth and development, which favored the formation of commercial and industrial organizations.

Educational and cultural activities grew along with economic progress. The travelling educational system disappeared with the formation of an educational organization, which created the German College. This soon earned a sufficiently high reputation to attract pupils from other places.
In the social ambit, the German Club was founded in 1882 to arrange meetings both for social and educational purposes; the best German publications and information of a more general nature were shared at these meetings.

With the arrival of the railway line in 1907, the station was built in Frutillar Alto and a small village grew up around it. It has grown tremendously since then, and today there are industries, services, businesses, gas stations and a clinic.