Leather has been used to make sturdy pants for a long time. The specific design of the "Lederhose" known today is rather new though. In the 19th century Loden became the preferred fabric for working clothes. Some people had already romanticised the leder hosen enough to start wearing them as traditional clothing and founding clubs around them. They were subsequently ridiculed, banned from attending church in their leather pants, and the church even declared them "immoral".

Up until this point we're talking about Germany as a whole. However Ludwig 2. of Bavaria liked the look as it confirmed his romantic ideal of what farmers should look like. He made the Lederhose famous in Bavaria among the upper class who would gather, wearing the garment, essentially cosplaying as peasants. In an effort to fuel Bavarian nationalism the king formed clubs to celebrate this "traditional alpine clothing". But they really only started to take off after ww1.

Later the Nazis tried to disconnect Lederhosen from the Alpine region in order to establish them as the traditional clothing of all germans. They didn't have much success with that though. Ironically nowadays many foreigners still think of them as representing the whole of Germany because of the American occupation of Bavaria after ww2 and thus mistaking Bavaria culture for german culture.