Before Finchale, Godric had tried hermit life at Wolsingham in upper Weardale, sharing a remote cave with an older religious recluse. He had also spent time at Carlisle and on the island of Lindisfarne, drawn to places where the inhabited world thinned out into wilderness. The Durham years and the doorkeeping job at St Giles were his last engagement with city life. Once Bishop Flambard granted him Finchale, Godric set up a hermitage in a wooded loop of the River Wear and rarely left. His biographer, the monk Reginald of Durham, recorded his austerities in unflinching detail. Godric wore a hair shirt, stood for hours in cold river water, prayed through the night. Whether these accounts are exaggerated hagiography or accurate description, they made Godric famous. Pilgrims started arriving while he was still alive.

For almost a decade before his death in 1170, Godric was confined to his bed, possibly because of damage done to his body by fifty years of ascetic practice. The monks of Durham Cathedral took over his care. He had become a celebrity by then, a man whose visions and prophecies were taken seriously even by kings. After he died he was buried at Finchale, then moved briefly to Durham, then returned to Finchale to lie in the church that would soon rise above his grave. Two Durham monks moved out to Finchale to maintain the site, and within twenty years the bishop had decided to formalise the arrangement. Godric became a saint by acclamation, though he was never formally canonised by Rome.

In 1196, Bishop Hugh Pudsey and his son Henry endowed Finchale as a priory dependent on Durham Cathedral. The first prior was Thomas, formerly the sacrist of Durham. The priory was small, never wealthy, but by the mid-15th century it had become the richest of Durham's dependent houses. Eight monks lived here under their prior. Construction continued for over a century after 1196, with the church developing across the 13th century and modifications continuing through the 14th. During the 1360s and 1370s the nave and chancel were narrowed by removing the aisles. The Hospitium, the guest house, dates from the mid-15th century. Most distinctively, Finchale operated as a rest facility for the Durham monks. Four monks at a time would travel out for a three-week stay, sharing the work and the relative freedom of country life.

What survives at Finchale today is mostly the late medieval phase of the priory. The ruins show heavily decorated capitals on the original arcade columns, tracery in the filled-in nave arches of the church, and on the south wall a double piscina and two carved sedilia seats where priests once sat during long services. The site has a quietness that visitors often comment on, partly because the River Wear forms a natural enclosure around the ruins, partly because the ruins themselves are not large. Finchale was never an architectural showpiece like Rievaulx or Tintern. It was a working priory and a retreat, and the buildings reflect that modesty. The site is managed by English Heritage. The precinct surrounding the ruins is now a caravan park, an unlikely but oddly fitting use for a place that has always been about temporary residents.

Finchale lasted until 1536, when Henry VIII's dissolution of the lesser monasteries ended its life as a religious community. Across its history the priory had 52 priors, and accounting records survive for much of the period from 1303 to 1535. Several of its priors went on to higher office: Robert of Stitchil and Robert de Insula both became Bishop of Durham. Henry de Stamford was elected Bishop of Durham in 1316 but never confirmed. Richard Bell, prior from 1457 to 1464, became Bishop of Carlisle. After the dissolution the buildings fell into ruin and the stone was robbed for local construction. By the 19th century the site had become a place of resort for Durham residents looking for a peaceful spot beside the river. That is largely what it remains today.