The area has long been settled; Old Oswestry is the site of a large Iron Age hill fort with evidence for occupation dating back to the 550s BC.
The Battle of Maserfield is thought to have been fought here in 642, between the Anglo-Saxon kings Penda and Oswald. Oswald's body was hung from a tree, which became known as "Oswald's Tree", which evolved into "Oswestry". The spring Oswald's Well is supposed to have originated where an eagle dropped one of Oswald's arms.
Offa's Dyke runs nearby to the west.
The Domesday Book records a castle L'oeuvre belonging to Rainald, a Sheriff of Shropshire. The Normans built a castle in the 12th century (which was reduced to a pile of rocks after the English Civil War), and the town changed hands between English and Welsh a number of times during the Middle Ages.
The town was still exposed to border fighting after the Civil War, and built walls for protection, but these were torn down in the 18th century, leaving only the Newgate Pillar visible today.
Notable natives of Oswestry include the composer Walford Davies, poet Wilfred Owen, and writer Barbara Pym.