Situated in a hilly area about half-way between Shrewsbury and Ludlow, Bishop's Castle was in a vulnerable location, on the Welsh border, with what may have been an ancient ridgeway from Wales passing through the southern end of the site. Bishop's Castle would be established within the sizable manor of Lydbury (not to be confused with Ledbury in Herefordshire, as Eyton, though aware of the problem, becomes), which had been given to Hereford cathedral in the Late Saxon period. The Bishop of Hereford, as one of the Marcher lords charged with securing the frontier, had built atop a spur a castle/palace there by 1127 and perhaps as early as 1088. The needs this generated attracted settlers around the castle gate, and spreading southwards down the hillside towards a church. In 1167 the original castle was replaced by a stronger fortification of stone, which did not prevent it from being captured in 1263 by the Earl of Arundel, another Marcher lord and one of the opponents of Henry III; the attack caused considerable damage to both castle and town. Although initially referred to as Lydbury Castle, in the thirteenth it and the adjacent settlement became known as Bishop's Castle.
In 1203 the bishop granted the residents a market charter. However, royal licence for a Tuesday market and a November fair was not obtained until 1394, on which occasion a later bishop also took out a licence for a second market at his Gloucestershire manor of Prestbury, within which a small planned town of about 30 burgages, laid out around a market-street, had already been established towards the mid-thirteenth century, though its proximity to Cheltenham doomed it to failure. It was probably at about the same time as the 1203 grant that a presumed village below Bishop's Castle would have been expanded with new tenement plots laid out along a north-south route (High Street in its northern part, Church Street in the southern) connecting the castle at the north end with an east-west through-road towards the south end; that through-road passed in front of the church. This settlement was protected, perhaps from the outset, with a ditch and rampart enclosure connecting to the castle earthworks, over which feature, decommissioned, streets were later built; the High Street/Church Street has a central position within this enclosure.
The impression given by Bishop's Castle is almost that of a classic new town layout with castle and church at opposite ends of an axial street. However, the church lies outside of the enclosure and is not heard of before 1291, when a parish was created for it, nor does any of its fabric pre-date the thirteenth century; it seems more probable that it did not pre-exist the town and that, if there were an earlier chapel, it may have been within the castle grounds. On the other hand, since the churchyard stands beside the through-road, which is where the street running south from the castle may have terminated from the beginning, we cannot discount the possibility that there had been an earlier chapel on that site. That the market space can reasonably be identified as a funnel-shaped widening – incorporating part of the present Market Square, which was formed partly from post-medieval expansion to the north-west of the original marketplace – at the north end of the axial street, just south of the castle, rather than a location by the churchyard or at the junction with the through-road, suggests both that it may date to a pre-urban period and that any early place of worship would have been associated with the castle.
All this supports the interpretation that Bishop's Castle was intentionally developed as a market town; though Beresford [New Towns of the Middle Ages, London: Lutterworth, 1967, p.479] felt that it was a castle-town planted at the time of the construction of the original castle, this was based on his misperception of a grid pattern in the streets. The urban component's initial focus, the Extensive Urban Survey report authors maintain, was instead on either side of the High Street closest to the marketplace, with later expansion spreading southwards along the axial street. As borough defences became redundant and their path was converted to streets, a false impression of a grid was given. A survey of episcopal lands ca.1285 records 46 burgages there; but we cannot quite describe the town as a liber burgus, for burgesses who brewed commercially were obligated to give the bishop 24 gallons annually, as a kind of licensing fee, the bishop had the power to requisition victuals from any of them on credit (payable within 15 days), and each was liable to service in the bishop's hunt. Such obligations are not evidenced for other boroughs on the bishop's estates. The castle was well maintained, and continued to act as episcopal residence, into the sixteenth century. This must have helped Bishop's Castle to retain its role as a small market town through the Late Middle Ages, expanding beyond its defences in the post-medieval period, acquiring a borough charter in 1573 and gaining the right to send representatives to parliament from 1584.
