The first traces of human activity at Finse are 7000 years old. Hunters and gatherers lived and hunted reindeer in the Finse area. Archaeologists have located several camps at the islands on Finse Lake from these peoples. The first tourists at Finse were British Lord Garvah and his son who in the 1850s used Finse as their base for hunting and fishing trips. A series of stone cabins, referred to as the "Lord Cabins" are still visible around Finse. The best known of these is "Lordehytta" in the Foldaskardet which remains in excellent condition.

The modern Finse community was created as part of the construction and operation of the Bergenline Railway. Finse is located on one of the most sheltered areas on the alpine stretch of the railway and was, for this reason, picked as the centre of the manpower needed to clear the track of snow in the winter.

After the opening of the railway in 1909 Finse "Mountain Chalet" (later Finse Hotel) was opened and it quickly became the desired holiday spot for European jet-setters like the Prince of Wales, Sonja Henie and Fridjof Nansen.

In 1914 Norway´s first indoor skating-rink was constructed at Finse. Triple-Olympic champion Sonja Henie lived temporarily at Finse and used this facility to practice for her three Olympic gold medals. The Skating rink was unfortunately demolished after Finse was bombed by the English during World War II.

Throughout the 20th century Finse has been used by numerous explorers to test equipment for polar expeditions. During the Second World War the Germans established a top-secret research base here in order to test the qualities of different engines and fuel types in a high altitude arctic climate. It was these research efforts that led to the English bombardment of Finse in 1943.

In more resent years Finse has been the location for many movie productions. The most famous of these was Star Wars Part II (the Empire Strikes Back). All the winter scenes of the movie where shot at the Hardangerjøkulen Glacier.