Clun was situated on the slopes on either side of the River Clun, whose valley served as an east-west route through the hills and forest of south-western Shropshire. The focus for earliest settlement there was likely around a crossroads by a church atop the south bank slope, though the village spread out along both banks of the river, and a second historical focus for settlement was a castle north of the river; the separation of church and castle may indicate that the former (or a predecessor) already existed in association with a pre-Conquest settlement by a river crossing, perhaps along with a manor-house [Tina Andrew, Medieval Small Towns in the Central Welsh Marches: An Analysis of their Development, Durham University MA thesis, 2017, pp. 118-20]. The two foci were linked by Church Street, carried across the river by a late medieval bridge (probably preceded by a ford), beyond which it slopes upwards as Bridge Street until it reaches a junction with the High Street.

Clun was the geographic centre and the caput of a very large Anglo-Saxon manorial estate that, after the Conquest, was held by Picot de Say, one of Roger de Montgomery's chief followers, as an honour; the church, though not mentioned in Domesday, was perhaps the mother-church of the manor. The small castle had been put up there, atop a spur on a bend in the river (north bank), before 1140, presumably by Picot's son Henry or grandson Elias, but was destroyed by Welsh forces in 1196. In Elias de Say's time Clun became a hundred in its own right, a Marcher lordship. Elias' daughter and successor Isabel married William I Fitz-Alan, lord of Oswestry, whereby Clun became part of the Marcher lordship of the Fitz-Alans, although Isabel was for some years its lord in her own right.

A town may have come into existence at Clun prior to the Fitz-Alan tenancy, or at the time the castle was rebuilt in stone in the early thirteenth century, probably by William II Fitz-Alan; the lack of record of a market licence suggests a market must have been in existence by or around that time. Located in the frontier zone, but in the valley through-route, Clun was a place where English and Welsh might do business together; a special court for the Welsh was held there.

Streets east of the castle are suggestive of a planned layout, bearing the imprint of burgage-type plots, and the bridge across the river may have been built around the same time, better-positioned for the town and castle than an older ford suspected as being more to the east. There are strong hints in the topography – notably the curvature of a road (now partly Bridge Street) leading from the castle southwards to the river crossing – of a possible ditch and rampart around the urban settlement, connecting to the castle bailey and serving in effect as an outer bailey; this would have protected a semi-circular area encompassing the bridge, marketplace and, just east of the castle, a chapel (which may have been built for the convenience of the new townspeople, the main church being somewhat distant). The High Street heads westwards to pass through about the centre point in the curving enclosure and enter a short street now known as The Square.

It is surmised the market was held in a wider version of The Square, near a gateway into the castle. The marketplace and burgage-type plots laid out around it thus probably represent the first phase of development of a castle-town, whose defensive enclosure was subsequently outgrown, so that settlement expanded outside it, perhaps in phases, notably along Church Street and part of the High Street, although plots in those places had wider frontages than the market-side properties. Just within the northern line of the posited ditch-rampart, and paralleling the High Street further south, is a street whose later name of Newport Street supports the idea that this was part of a planned urban expansion. Those two streets are connected by two cross-streets. We do not know, however, that the various expansion units were laid out all at the same time; it seems likeliest that the market settlement within the outer bailey was the oldest, with planned neighbourhoods, comprising High Street, Newport Street, and north-south connecting lanes, created later, though not necessarily all at once. Property plots on the south side of the river, along Church Street, also look quite regular and may represent some reorganization of the area, conceivably around the same period as the laying out of the planned town on the north bank.

Some of this expansion might have coincided with the royal grant to William II Fitz-Alan in 1204 of a November fair at Clun, and some with expansion of the castle and extension of the town's defensive circuit (ditch/bank) in the late thirteenth century. A second (May) fair was licensed in 1253 to John Fitz-Alan, both fairs being of three days duration. These fairs suggest a growing role in long-distance commerce and possibly that traders were among those being attracted to settle. We hear of Clun's market in 1241, when two years' worth of tolls of Clun's market and fair were valued at £36 17s. 8d, and again in 1272 when an extent of the Fitz-Alan barony was occasioned by the succession of a minor. On the latter occasion we hear of a Saturday market generating about £10 annually in tolls, the two fairs (estimated to fetch an annual income of £6), and 183 burgages, of which 22 had holdings in the fields, while Clun is referred to as a borough with a portmoot court.

A grant of murage in 1277 is another reflection of Clun prospering, thanks primarily to the wool trade. To what end the murage proceeds were put we are not sure; no remains of stone walls have been found, but a wider earthworks enclosure, to accommodate expansion of the town, may have been built to supersede the earlier enclosure mentioned above. Clun remained a target for occasional attacks, and in 1302 the tolls from market and fairs was estimated only at £5, while in the town there were said to be only 85 rent-paying burgesses and 60 tenements unoccupied. Despite fluctuating fortunes. Clun held on as a modest market town throughout the medieval period and beyond, though its urban character faded and it eventually lost that status.