The origin of the name of Bungay is thought to derive from the Anglo-Saxon title 'Bunincga-haye', signifying the land belonging to the tribe of Bonna, a Saxon chieftain. Due to its high position, protected by the River Waveney and marshes, the site was in a good defensive position and attracted settlers from early times. Roman artifacts have been found in the region.
Bungay Castle was built by the Normans, but was later rebuilt by Roger Bigod and his family, who also owned Framlingham Castle. Bungay's village sign shows the castle. The Church of St. Mary was once the church of the Benedictine Priory, founded by Gundreda, wife of Roger de Glanville. It was here that one of the most famous episodes in Bungay's history occurred:
On Sunday August 4, 1577 at St Mary's Church during a service, the ghostly hound Black Shuck, also known as 'The Black Dog of Bungay' is said to have killed two and left another injured. The dog was later believed to have visited the Cathedral of the Marshes at Blythburgh (Holy Trinity Church) during the same thunderstorm within an hour of the appearance at Bungay. In that appearance the hound, after charging down the aisle, fled through the North door of the church. Large black scorched gouges can still be seen on the door.
The legend of Black Shuck has inspired several of the town's sporting events. An annual marathon "The Black Dog Marathon" begins in Bungay, and follows the course of the River Waveney and the town's football club is nicknamed the "Black Dogs". Black Shuck was also the subject of a song by The Darkness.
The town was almost destroyed by a great fire in 1688. The central Buttercross was constructed in 1689 and was the place where local farmers displayed their butter and other farm produce for sale. Until 1810, there was also a Corn Cross, but this was taken down and replaced by a pump.
Bungay was important for the printing and paper manufacture industries. Joseph Hooper, a wealthy Harvard graduate who fled Massachusetts when his lands were seized after the American Revolution, rented a mill at Bungay in 1783 and converted it to paper manufacture. Charles Brightly established a printing and stereotype foundry in 1795, which in partnership with J. R. Childs, became Brightly & Childs in 1808 and later Messrs. Childs and Son. It was further expanded after 1876 as R. Clay and Sons, Ltd.
The railway arrived with the Harleston to Bungay section of the Waveney Valley Line opening in November 1860 and the Bungay to Beccles section in March 1863. Bungay had its own railway station near Clay's Printers. The station closed to passengers in 1953 and freight in 1964.