Donegal gave its name to County Donegal, although Lifford is now the county town. Until the early 1600s, Donegal was the 'capital' of Tír Chonaill, a Gaelic kingdom controlled by the O'Donnell Clan of the Cenél Conaill. Donegal sits at the mouth of the River Eske and Donegal Bay, which is overshadowed by the Bluestack Mountains ('the Croaghs'). The town is bypassed by the N15 and N56 roads. The centre of the town, known as The Diamond, is a hub for music, poetic and cultural gatherings in the area.
There is archaeological evidence for settlements around the town dating to prehistoric times including the remains of round forts and other defensive earthworks.
St. Patrick was captured by raiders from the clans governed by Niall of the Nine Hostages, and this region is that to which Patrick returned, being familiar with the people, language, customs and lands. The first clan to convert to Christianity as the result of St Patrick's efforts was Clan Connaill (also known at one time as Clan Dálaigh: in English, this is pronounced Daley and it translates as "one in a leadership role"). Connall was a son of Niall of the Nine Hostages. As a result of their acceptance of Christianity, Patrick blessed the clan members; the sign of the cross appeared on the chieftain's shield and this became not only the heraldic device for the clan but also for County Donegal.
Donegal Town itself is famous for being the former centre of government of the O'Donnell Clan, the great Gaelic royal family who ruled Tír Chonaill in west Ulster for centuries and who played a pivotal rôle in Irish history. Their original homeland lay further to the north in the area of Kilmacrenan. From the 15th to the 17th century, they were an important part of the opposition to the colonisation of Ireland by England. The town itself contains Donegal Castle, on the banks of the River Eske, and the remains of a Franciscan abbey which dates back to the 15th century on the Southern shore of the Bay. The Annals of the Four Masters may have been partially written in the old abbey in the 1630s. The story of Aodh Rua Ó Domhnaill (Red Hugh O'Donnell, also known as Red Hugh II), Lord of Tyrconnell, was the inspiration behind many books and films, not least, Disney's The Fighting Prince of Donegal.
After the Flight of the Earls from near Rathmullan in September 1607, the castle and its lands were seized by the English Crown and given to an Englishman, Captain Basil Brooke, as part of the Plantation of Ulster. Brooke was granted the castle around 1611 and he proceeded to carry out major reconstruction work and added a wing to the castle in the Jacobean style. The current plan of the town was also laid out by Brooke, including an attractive town square known as The Diamond. From the late 17th until the early 20th centuries, Donegal Town formed part of the vast estates of the Gore family (from 1762 Earls of Arran in the Peerage of Ireland) and it was during their ownership that the town took on its present appearance. Donegal Borough returned two members to the Irish House of Commons, the lower house of the Parliament of Ireland, until the Act of Union came into force in January 1801. Evidence of the Irish Famine still exists including a workhouse, whose buildings are now part of the local hospital, and many famine graves.