Madison, named in honor of United States President James Madison, was established as the county seat of the newly formed Morgan County and incorporated December 12, 1809. The community was designed using a typical town square layout and the first town lots were sold in 1809. Madison became the main economic center of Morgan County, with a bustling commercial downtown. Commerce was further encouraged by the community's location on the stagecoach route between Philadelphia via Charleston and New Orleans, and as the crossroads of two major railroad lines.

The existing courthouse, constructed in 1905-06, is the third courthouse built in Madison. The first two were lost to fire in 1845 and 1916. The present brick commercial district was built after the Fire of 1869 destoyed all but one business in the then wood frame constructed downtown. Madison features an impressive collection of pre-Civil War and Victorian style architecture and was spared major destruction during the Civil War because of a local resident, pro-Union Senator Joshua Hill. Today, Madison's historic architecture has allowed the community to boost the area's economy through tourism, as the community has a large and well maintained historic district. Madison's location continues to be an economic advantage; today it is the intersection of an Interstate and three State highways.