The market town is a medieval phenomenon. In Britain, even up to the 19th century, the majority of people lived off the land, and relatively few in towns. Market towns were an important feature of rural life, as some place names remind us: Market Drayton, Market Harborough, Chipping Norton and Chipping Sodbury - "chipping" being derived from an Saxon word, meaning "to buy".

Market towns often grew up close to fortified places, such as castles, in order to enjoy their protection. They tended to be located where transport was easiest: for example, at a crossroads or close to a river ford.

The most obvious feature of the traditional market town is a very wide main street or market place, with room for stalls and booths to be set up on market days. A market cross often stood in the centre of the town, as a way of obtaining God's blessing on the trade. The best remaining examples of market crosses in England are at Chichester and Malmesbury. There would often be a market hall, with administrative quarters at first floor level, above the covered market.

Colchester claims to be Britain's oldest recorded market town.

The right to hold markets is similarly recollected in the names of many towns in Germany which begin "Markt ...", and the status of Marktgemeinde still has significance especially in Bavaria. The Swedish equivalent to a market town was köping and Finnish is kauppala .