Atalissa was platted in 1859. It was named by its founder, William Lundy, for a mining town in California, which in turn was named for an Indian queen Atalissa.
From 1974 to 2009 Atalissa was the home of a few dozen intellectually challenged men who worked in a nearby turkey processing plant.[5] They lived together in an old schoolhouse and were taken each workday to the plant, and after expenses were taken out, were paid no more than $65/month. They were removed and relocated by state agencies in 2009, after being found to be living in unacceptable conditions. A 2013 verdict awarded the men a total of $240 million in damages, since reduced to $50,000/man. The men's plight had a profound effect on social services in Iowa, and their experiences and subsequent court case was the subject of the documentary film The Men of Atalissa