Grace Lutheran Church was organized in Oskaloosa, Iowa in a house north of downtown during 1945. The location was at the northeast corner of B Avenue West and North A Street. Soon, a better meeting location became available as Presbyterians had just built a new worship building and let the older church building open for rent.

From 1946 until 1963, Grace Lutheran Church held services in the old Presbyterian Church on 3rd Street south off Highway 92. With changes to the downtown area and Grace's congregation growing in numbers, a new location was searched for to build a new church facility.

In 1963, a new church was constructed on a site off then Highway 63 South and 9th Avenue. The new location provided space for the church building and parking for about 35 - 40 vehicles. This location continues to service today's Oskaloosa congregation. The highway numbering changed in the late 1990s and the current address is Highway 23 and 9th Avenue.

In the early 1980s, the congregation at Grace decided that a parsonage for the pastor and his family could be build south of the church on property that had just come up for sale. The parsonage was built with the help of a Lutheran Association for Church Extension (LACE) loan.

In 1998, a new addition to the west side of the church was completed which added handicap access, a space for fellowship time and Bible study, and additional classroom space in the lower level. In 2009, the church completed a major rennovation to the roofing, adding 4" of insulation over the sanctuary and new Decra metal shingles over the entire roof span.

For a period of years from 1995 to 2007, a sister congregation named Our Savior held services in Pella, Iowa at the Pella Memorial Building on the west side of the downtown square. With as many as 7 families attending services during the duration of the congregation, God blessed the church.

Pastor Roger Neumann has served Grace Lutheran Church as pastor since 1980 to the present day.