The original Montgomery was a motte-and-bailey called Hen Domen, raised by Roger de Montgomery, Earl of Shrewsbury, around 1072 a mile northwest of where the stone castle stands today. It was captured by Prince Cadwgan ap Bleddyn in 1093. When Roger's son Robert of Belleme rebelled in 1102 and lost his lands, the castle was granted to Baldwin de Boulers, whose name attached itself to the Welsh town: Trefaldwyn, Baldwin's town, as Montgomery is still called in Welsh. The Boulers family held it until 1214, when Llywelyn ab Iorwerth, Llywelyn the Great, destroyed it. Nine years later Henry III decided to rebuild it properly in stone, but on a different site. The new castle would sit on a high rock a mile southeast of the old motte, and Hubert de Burgh, the king's chief justiciar and the rebuilder of Skenfrith, Grosmont and White Castle, would design it.

Montgomery received its Royal Charter in 1227, making it the oldest borough in Wales. Forty years later, in September 1267, Henry III met Llywelyn ap Gruffudd, grandson of Llywelyn the Great, under the castle walls and signed the Treaty of Montgomery. The treaty was a remarkable concession: Henry formally recognised Llywelyn as Prince of Wales, a title with no English equivalent and one the English crown had never granted before. Llywelyn paid homage in return and agreed to a substantial annual tribute. The high point of native Welsh political power, before everything was lost again at the Battle of Orewin Bridge in 1282, was negotiated in the shadow of the very castle whose garrison would help kill Llywelyn fifteen years later. The same garrison helped form the army that ran him to ground in mid-Wales. The treaty's wax seals had not had time to crumble before the politics it captured was already coming apart.

In April 1593 a son was born inside Montgomery Castle to Sir Richard Herbert and Magdalen Newport. He was given the name George. The Herbert family had recently been granted the castle by James I, and they made it their home through the early 17th century. George Herbert grew up between Montgomery and his mother's circle in London. He became one of the great metaphysical poets, friend of John Donne and Francis Bacon, eventual rector of Bemerton in Wiltshire, author of The Temple, the collection of devotional poems published after his death in 1633 that placed him alongside Donne and Vaughan in the English religious lyric. His brother Edward, Lord Herbert of Cherbury, was a philosopher and diplomat. By the time the English Civil War reached Montgomery in 1644, Edward was the elderly lord of the castle, ill and unwilling to fight, and he surrendered it to Parliament on terms. The Battle of Montgomery followed within days, and what George had known as a family home became a battlefield.

There is one more story Montgomery carries, even though it almost certainly never happened. The Hungarian poet Janos Arany wrote a ballad in 1857 called The Bards of Wales, retelling a legend that Edward I, after conquering Wales in 1282, hosted a banquet at Montgomery Castle and demanded that five hundred Welsh bards sing his praises. When they refused, he had all five hundred burned at the stake. There is no historical record of such an event; the story almost certainly grew up later, partly as Welsh national myth, partly as a vehicle for Arany's own coded protest against Habsburg rule in Hungary. But the ballad is taught in every Hungarian school and the legend has wrapped itself around the ruin so tightly that the two cannot be separated. After the Royalists were defeated under the castle walls in September 1644, the place was slighted by Parliament in 1649. The wall was pulled down to prevent it being used again. From the air the castle reads as a rectangular outline of low walls on a rocky hill above the half-timbered Georgian town, the well tower's foundations clear, the inner ward open to the sky.