Madeley is situated in a shallow valley whose stream drains into the River Severn; an east-west through-road between Shifnal and Much Wenlock ran through the parish. These connections indicate the principal marketing zone of Madeley's traders. Off this road two curvilinear roads running southwards and joining close to the churchyard represent the communication routes of early villagers' homes to their fields. The estate came into the possession of Wenlock Priory as early as the eighth century, not long after the time that settlement in the area was first established, following clearing within what was later royal forest, especially heavy to west and south; consequently we hear much of pigs being grazed there. Open fields were mostly in the immediate vicinity of the village and shared with residents of other settlements in the parish; in the thirteenth century some seems to have been transferred to keeping sheep. The original abbey at Wenlock was refounded after the Conquest as a Cluniac priory and by 1187 the village was referred to as Priors Madeley; it remained held by the priory until the Dissolution.

It was to the prior and convent that a licence for a Tuesday market and September fair was issued in 1269. This was a period when the priory was at its most prosperous. Prior Umbert (1221-60) had been a capable and energetic administrator in favour with the king, who used him as a negotiator with foreign powers on more than one occasion, and was active in exploiting and enlarging the priory demesnes and in extensive rebuilding of the priory. He obtained a market licence for Much Wenlock in 1227 and, when in 1250 the sheriff had orders to demolish Madeley houses encroaching on royal forest, the prior preferred to offer the king a fine to be granted the land he had cleared and preserve the houses. It may have been Umbert who envisaged, or even initiated, the planting of a new town there, although the market licence was acquired by his successor Aymo de Montibus, who – faced with paying off debts built up by his predecessor – would have been desirous to find new sources of money. The king's attachment to the priory is seen in his preparedness to issue the licence despite having had doubts about Aymo's loyalty in the earlier crisis years of that decade.

The licence was probably a pre-requisite for proceeding with establishing the urban unit, north and east of the church (some of whose fabric dates back to the twelfth century, though the dedication to St. Michael suggests an earlier existence) and village, along a stretch of the through-road later the High Street. However, (allowing for the reluctance of ecclesiastical lords to grant borough status) we have no reference to burgages there until 1326, when 25 tenants were in possession of 52 such properties within what was described as 'the town of the new market of Madeley', and seven other burgages (held by four tenants) were present in the prior's demesne to the north; there is slight evidence there were further burgage plots that never found tenants and so were not built on. Though a part of the priory's liberty, the market town's administration necessitated establishment of a new court which began as twice-yearly great court sessions, gradually augmented by interim (petty court) sessions held every three weeks; by the late fourteenth or early fifteenth century it had absorbed the original manorial court for unfree residents, though the boundaries between these various sessions had always been fuzzy and the overall jurisdiction was little wider than a leet court that dealt also with the assizes of bread and ale. The royal charter of 1468 to Much Wenlock incorporated the whole priory liberty within that borough and the town subsequently became one of its administrative units.

Madeley's market was likely held in a widened area of the axial street (the through-road), at the west end of the later High Street, and where the through-road was joined by one end of the older, looping street heading south to village and church. Other lanes ran northwards into the fields. Components of the burgage plot layout can still be tentatively identified on either side of the axial street, on both east and west sides of the marketplace, with others further east on the High Street. These features suggest a planned town, although it is not certain the burgages were all laid out at the same period, nor how promptly they found tenants. There is no indication that in the medieval period Madeley flourished greatly nor expanded much beyond its original layout; the fourteenth century was a more difficult time for Wenlock Priory, in part due to threat and then the actuality of seizure of alien priories by the Crown, and there was no further investment by the priors in additional market days or fairs. The town had little industry of note until the post-medieval period, when coal and iron deposits in the area began to be exploited (although modest coal-mining was taking place in the parish from the fourteenth century). Yet perhaps the priory's ambitions for the town, in terms of revenues it generated, were met, if not fully then satisfactorily, and Madeley seems to have maintained its modest role as a small market town into the post-medieval period.