Horseshoe Bay citizens voted to incorporate as a Class A City under Texas law on the 10th of September 2005. The boundaries of the city followed those of the Lake LBJ MUD, with the exception that The Trails and one 20 acre parcel on the corner of Hwy 71 and Ranch Road 2821 were omitted.

The first Mayor and City Council were elected at a general election November 8th, 2005. They were sworn in at Quail Point in ceremonies November 18th. The Council met for the first time on 22 November 2005 and the council elected officers.