Historically Lydford was an economic powerhouse, not the sleepy village which it is today.
The village was established as one of the four Saxon burhs of Devon by king Alfred the Great. It first appears in recorded history in 997, when the Danes made a plundering expedition up the Tamar and Tavy as far as Hlidaforda (i.e. Lydford). The attack is described in the following passage from the Anglo-Saxon Chronicle:
During the reign of Ethelred the Unready, there was a mint, and coins minted there were inscribed LVD., LVDA, and LVDAN. In the reign of Edward the Confessor it was the most populous centre in Devonshire after Exeter, but the Domesday Survey relates that forty houses had been laid waste since the Conquest, and the town never recovered its former prosperity Under the Normans, and according to the Domesday Book, Lydford is taxed equally with London, giving an idea of its significance at the time, the reason being that the parish of Lydford embraced the entirety of the Forest of Dartmoor under the Normans (as it did until the 20th century).
Until the 12th century parishioners from across more or less the entirety of Dartmoor were brought to Lydford for burial. The path used to make this final journey is known as the 'Lych way'. Many reports have been made of monks in white and phantom funeral processions seen walking along this path.
The history from the 13th century centres round the castle, which is first mentioned in 1216, when it was granted to William Briwere, and was shortly afterwards fixed as the prison of the stannaries and the meeting-place of the Forest Courts of Dartmoor. A gild at Lideford is mentioned in 1180, and the pipe roll of 1195 records a grant for the reestablishment of the market. In 1238 the borough, which had hitherto been crown demesne, was bestowed by Henry III on Richard, earl of Cornwall, who in 1268 obtained a grant of a Wednesday market and a three days fair at the feast of St Petrock. The borough had a separate coroner and bailiff in 1275, but it was never incorporated by charter, and only once, in 1300, returned members to parliament.
During the English Civil War, Lydford was the haunt of the then notorious Gubbins band, a gang of ruthless cut-throats and highwaymen, who took advantage of the turmoil of the times to ply their villainry. According to one account of the time:
In 1987 the parish of Lydford finally lost its claim to be the largest parish in England. It was split into two civil parishes, Lydford and Dartmoor Forest. The ecclesiastical parish has also been split, with Princetown made a separate parish.