The town’s strategic importance as a seaport emerged during the later medieval period when it belonged to the bishops of Raphoe, who built a castle overlooking the harbour in the fourteenth century. By the end of the sixteenth century, a small fishing village had developed here, but Killybegs truly came to prominence during the Nine Years’ War when Spanish ships landed arms here in 1596 and 1600; the latter delivery brought 2,000 calivers and 2,000 pikes along with the titular archbishop of Dublin, who promised O’Donnell and O’Neill that a Spanish army of liberation would arrive, though it ultimately landed at Kinsale instead.

The English government recognised Killybegs’ strategic significance and selected it as one of seven potential boroughs to be erected in Donegal in 1609. After several years of planning difficulties, the town was finally incorporated on 14 December 1615 under Roger Jones, constable of Sligo, who received 200 acres on condition he would build twenty houses for burgesses, lay out a market place, and provide sites for a church, churchyard, public school, and 30 acres of common land. Despite these ambitious plans, the plantation struggled to attract settlers; by 1622, the ‘new town’ had only 17 British and Irish inhabitants, and the 1659 census recorded just 31 adults, comprising 10 English and Scots and 21 Irish residents.

The town’s layout follows an essentially linear pattern, with Main Street facing the sea and doubling as a harbour frontage, whilst Bridge Street and O’Hare Lane run perpendicular to it. The original market place likely stood at the west end of Main Street where it meets Bridge Street, and the late medieval settlement of Cealebeg was located south of the town around the remains of Cat Castle and St Catherine’s Church. Despite its small population, Killybegs managed to establish a modest seaborne trade, handling about 12% of Irish herring exports in 1626. Archaeological investigations carried out between 2000 and 2003 have revealed little evidence of earlier occupation beneath the modern town, suggesting that much of the historic settlement pattern has been preserved in the current street layout.