Described by Beresford [New Towns of the Middle Ages, p.481] as "A classic example of Norman town plantation," Ludlow was founded at the end of a ridge, atop a spur overlooking the River Teme, near its confluence with the Corve, and controlling the point where an ancient land route forded the former. While its role was initially strategic, from a military perspective, the location was also advantageous in terms of commercial traffic along the Welsh border and between Wales and the Midlands. Domesday records an estate named Ludford, probably the Saxon focus of settlement, on the south side of the river, but Ludlow itself is not mentioned (the name first appears in 1138), and is generally thought to have been founded some decades later, although the timing has been hotly debated.

Ludlow's origins are connected with the erection of a ringwork castle on the hill-top – probably built between 1075 and 1090 by Walter I de Lacy and/or his son Roger, holders of the large manor of Stanton Lacy adjacent but without other fortification in Shropshire; what would become Ludlow – not a large area – was probably part of that manor. Walter appears to have established a market settlement adjacent to Hereford [Nigel Baker, The Historic Townscape of Central Hereford, Herefordshire Archaeology Report no.266 (2010), p.19]. The castle may have been put up in the context of Roger's participation in rebellions against William Rufus, for which he was exiled and his lands given to his brother Hugh. It was developed by the Lacy heirs, over the next century, into an important border defence and an assembly point for military campaigns into Wales, and was the caput for the Lacy family in that part of Shropshire.

A settlement of rural character, called Dinham, grew up south of the castle, just outside its inner bailey gate, and included a green that may have hosted a market. An urban extension to this developed, as a source of revenues, over a relatively short period, probably beginning in the early twelfth century – perhaps around the time a large gatehouse was added to the castle (by 1130), or in the years that followed. If the settlement experienced serious damage when the castle underwent a siege by Stephen's forces in 1139, that could have provided an opportunity for a renewal initiative involving a planned layout. The first surviving reference to burgages there is from 1186; burgage rents appear to have been at the early level of 12d., as suggested by a grant (1267) of seven such rents by Geoffrey de Genevill to the Priory of Acornbury. By the late twelfth century the town had become moderately large (population estimated at roughly 2,000 in the fourteenth century), but there is evidence of an urban community as early as 1169 and the rebuilding of the main church on a larger scale (1199) looks like a logical conclusion to the principal – whether staged or continuous – period of planned urban development.

Although Ludlow is usually described as having been a de Lacy town during the twelfth century, the identity of the lord of Ludlow during that period when it is conjectured to have acquired an urban component is not so clear. Eyton suspected Hugh de Lacy dead by 1121, survived by a brother who was a monk and two sisters, one of whom had a son Gilbert who assumed the Lacy surname but was nonetheless ignored by Henry I in apparently giving custody to Pain Fitz-John, whose wife seems to have been a Lacy. Pain superseded Richard de Belmeis as Henry's viceroy in Shropshire and would at some point put up a castle at Painscastle (Wales), where a borough would be established in the early thirteenth century. After Pain's death (1136) King Stephen gave the Lacy lands to Pain's daughter Cecily, though reserving the castle to his own custodian, Joceas de Dynan, whose surname may have given rise to, or been taken from, 'Dinham'; she was shortly thereafter married to Roger Fitz-Miles, the son and heir of the Earl of Hereford. Roger dying childless (1155), Ludlow was claimed by the son of Cecily's sister. Joceas having joined Matilda's cause against Stephen, the latter resorted to Gilbert de Lacy as a rival claimant to the Lacy estate and he entered into a feud with Dynan, who may have controlled the castle, at least during much of the civil war, and is credited by one chronicler with adding a bailey or two. In such muddy waters, confident identification of the agent of urbanization at Ludlow is beyond our reach. Though Michael Faraday argues the case for Dynan as founder of a proto-urban settlement [Ludlow 1085-1660: A Social, Economic and Political History, Chichester: Phillimore, 1991, pp.3-4], I am inclined to think that Pain Fitz-John is a likelier candidate and that the role of Joceas de Dynan – who had no sound claim to more than custody of the castle – was limited to increasing the defensibility of the castle and adjacent settlement, while Gilbert de Lacy's claim to lordship of Stanton Lacy was an empty title until 1156, he never seeming to have had any active involvement with the territory, and his son and successor was preoccupied by responsibilities in Ireland.

Over the next century the Lacy fortunes were up and down, and Ludlow was at times in royal hands, but in February 1244 the Lacy estates in Herefordshire were divided between two female heirs, of whom one was wife of Peter de Geneva, one of the foreign favourites of Henry III, while the other was married to John de Verdun, whose ancestor Nicholas had obtained in 1227 a market licence for Bretford (Warks.) and perhaps founded the borough documented as being there later in the century. In March the castle of Ludlow was committed to Peter, by right of his wife; after Peter's death (1249) his widow married Geoffrey de Genevill (from Joinville in Champagne). By 1260 lordship of the borough of Ludlow had been partitioned equally between these two couples. Inquisitions post mortem on the heir of John de Verdun in 1271 and on John himself in 1274 confirm he held half the borough and a share of its tolls, as part of his barony of Weobley. The Genevills held the other half but their main interests were in Ireland – just as the focus of the Verdun family was Staffordshire – and in 1283 they turned over their English holdings to their son Peter de Genevill.

Current understanding of the physical development of the town of Ludlow stems from the work of M.R.G. Conzen, who used Ludlow as a case study to illustrate his theories on urban morphology; at the risk of over-simplifying, his approach was to identify distinctive plan-units within the urban landscape that represented progressive development of the town between late eleventh and mid-thirteenth centuries, evolving without a master-plan although some individual units evince planning; from this viewpoint what might appear in the finished product as a planned grid of streets would actually be the outcome of piecemeal and incremental development. Conzen's approach has won wide acceptance within Britain's community of historical geographers, though it has its critics, such as Jeremy Haslam [Town-plan analysis and the limits of inference: the cases of Bridgnorth and Ludlow, Shropshire, unpublished paper, 2009; https://jeremyhaslam.files.wordpress.com/.../bridgnorth-and-ludlow-town- plans.pdf, last checked 12 Nov. 2015] who argues that many of the components of Ludlow were as likely conceived and laid out as part of a single unified plan. A site as large as Ludlow is complicated to interpret and a number of models of urban development have been proposed. Except at a friary, there have been only minor excavations conducted in Ludlow, so that competing models have not yet really been put to the test of archaeology. Here we are mainly concerned with the early emergence of a market-based settlement, rather than the growth of the entire town.

The castle stood on the west side of the town, atop the end of the ridge, where cliffs descend to the river Teme, which loops around the southern and western sides of the town, joined in the north-west by a second watercourse, the Corve, running across the northern side. The early settlement of Dinham, despite its possible marketplace, was not urban in other characteristics (e.g. shape of tenement plots). It was augmented, probably during the reign of Stephen or Henry II, with settlement along a street heading eastwards along the ridge, away from the entrance to the outer bailey, an addition to the original castle; this wide street (now partly the High Street) served as the new marketplace, which may have had particular settlement foci at the castle end and near the church of St. Leonard at the eastern end (where the tollhouse was located), the area from which we have the earliest reference to burgages. This was a classic Norman castle-town layout, even though the church was not on the highest part of the terrain (where most visible and its bell more audible to townspeople); the castle had its own chapel, while one within Dinham likely served the original community, so perhaps St. Leonard's was situated for accessibility to all settlers in the area. At its east end the market street formed a junction with a more ancient through-road (later known as Old Street) whose southwards route took it across a ford and on towards Hereford, while the northwards stretch met a second ancient route, from the east, which proceeded west to cross the Corve and head off to Shrewsbury.

There are some indications of -pre-urban settlement north of the ford, part of the separate lordship of Ludford; it is conceivable that this could have contributed to a straggling trading community growing up at early date along Old Street, including its stretch beyond the chapel of St. Leonard's, where we first hear of burgages [for this model, see Paul Hindle, Medieval Town Plans, Shire Publications, 2002, pp.60-61]. The wide junction of the market street and Old Street became known as the Bull Ring, suggesting it the location of sale and/or slaughter of livestock (probably the principal goods brought by Welsh traders). In the Late Middle Ages we hear of specialized markets, such as those for corn or apples, though these were probably in some section of the established marketplaces.

Ludlow is one of the best-documented towns of the Welsh Marches, thanks in part to the times it was in the king's hand. Faraday [op. cit., p.114] gives examples, from accounts kept in such periods, of revenues from markets and fairs, and these must be considered more accurate than the rough or standardized estimations of value available occasionally from inquisition post mortem records. On Saturday 9 August 1287 the receipts from market tolls were 14s.1d., while on Wednesday 13 August 40s.11d. came from tolls and stallage fees, while during the rest of the year such receipts totalled 84s; in 1299 the total was £6 14s. 8¾d., in 1308 £14 9s.9d., and in 1368 £13 was the combined total (perhaps rounded off or the product of a farm contract) from market and the fair. These are comparable to figures seen at Clun and Oswestry. Given the absence of a recorded licence before 1462 (see below), we do not know the market day at Ludlow; in 1462 it was specified as Thursday and this seems to have been the case in 1429, but at earlier periods different days are implied, and it may well be that trading was not confined to the single formal day. The fair heard of in 1292 was probably that held in August, and is mentioned in the early thirteenth century, when Walter Lacy (d.1241) required that a rent be paid him at the Ludlow fair. In the latter half of the fourteenth century it became the habit to farm out the two fairs to the town's bailiffs, for £11 annually; in 1429 £10 was set as the farm for one fair and the market tolls, and by 1442 the fairs, market tolls, and tenser fees were farmed as a package for £21.

From the market street two other streets, parallel to Old Street, headed south to the river: Mill Street, terminating at the riverside mill, and Broad Street headed for the bridging point. A bridge is known to have been built in the early thirteenth century, perhaps to divert traffic onto the street heading more squarely into the marketplace – though does not preclude an earlier crossing – and so needing to be broad enough to accommodate market-bound carts; when a defensive wall (built in Edward III's reign) later enclosed the town, gateways were incorporated for those two streets and for Old Street. The market-neighbouring stretches of all of those streets may have been used for market activities as population and commerce expanded. Within this area of the main streets were narrower back lanes and cross-lanes. Burgage plots are evidenced along all these main streets, although those surrounding the market were narrower (indicating higher demand and need for greater numbers of plots there), while those along the other streets were up to twice as wide. We may reasonably suspect the market tenements were the first to be established, with those along the other streets possibly laid out at the same time, but as likely to have been made available at a later period, in response to population growth.

A fair is heard of in 1241 and the marketplace in 1255; the absence of a royal grant suggests they were in existence before the requirement for licensing was enforced. The market and fair are heard of again in the context of quo warranto proceedings in 1292, when Theobald (son of John) de Verdun, and Geoffrey de Genevill and his wife were ordered to justify their right to a court, fair, and market at Ludlow; the widow of Peter de Genevill appeared to advise the justices that she was co-holder (with Theobald) of the manor, by grant of Geoffrey, on behalf of Peter's underage daughters, thereby obtaining a deferral of the hearing until the girls came of age. Geoffrey and Theobald were both recipients of some of the series of murage grants issued by Edward I (though begun in the previous reign), again reflecting their shared ownership of market and fair rights.

Although livestock, grain and other rural products must have been major items of trade throughout the Middle Ages, the wool trade and cloth industry became central to the local economy in the thirteenth century; the former weakened in the Late Middle Ages, but the latter strengthened. We know of a fulling mill and tenter yards at Ludlow, and occupational names show the presence of the traditional trades involved in leather processing and the various occupations that made up the cloth industry, including shermen, cap-makers, hosiers, and mercers; also evidenced are bakers, fishermen. potters, masons, smiths, furbishers, bell-founders, and goldsmiths, while moneyers are heard of in late twelfth and thirteenth centuries. Evidently Ludlow had a well-diversified economic sector, with several craft groups large enough to associate in gilds by mid-fourteenth century; for purposes of the Corpus Christi procession, the borough authorities ordered in 1368 that the crafts march in the following order (lesser to greater): millers, bakers, butchers, barkers, saddlers, glovers, dyers, weavers, fullers, cordwainers, tailors, skinners, drapers, and merchants.

As the de Lacy estates became a bone of contention among rival claimants and were, in late thirteenth century, divided amongst multiple heirs, it must have become easier for Ludlow's burgesses to acquire some independence from seigneurial bonds. In 1301 Roger de Mortimer, Earl of March, became lord of Ludlow by marriage to Joan de Genevill; he and his wife were more engaged with Ludlow than previous Lacys, Genevills, and Verduns. After Roger was instrumental in the overthrow of Edward II, he arranged for a second fair at Ludlow to be licensed (1328), in the name of himself and his wife; possibly this was a way of celebrating the fact that Joan had given birth at Ludlow to a son and heir two weeks earlier, and the fair was to occur around the festival of St. Katharine, whose cult was very popular with women, for she was considered a paragon of chastity (a virtue to which Mortimer himself could not lay claim). Issue of a much-belated market charter, along with grant of a third fair, was made in 1462 by Edward IV, successor to the Earldom of March, directly to the burgesses of Ludlow, following up a charter of borough incorporation the previous year, itself compensation for the sack of the town in 1459, in the context of the Wars of the Roses. After this the independent borough government collected market dues directly, but left the fairs at farm; figures known for tolls after this time were lower than in the past and continued to drop, although we should be careful about concluding that this reflects simply a contraction in commerce. However, drop-off in court business may point in that same direction, as too the clause in the 1461 charter that provided a by now somewhat outmoded authorization for a merchant gild and a trade monopoly to its members.