The village was served by the standard gauge Mawddwy Railway which connected with the Cambrian Railways at Cemmaes Road Station. This was built to serve the slate quarries at Minllyn and Aberangell.
In the 16th century, the Mawddwy area was the home of the Red Bandits of Mawddwy (Gwylliaid Cochion Mawddwy), which is remembered in the village pub, The Brigands in the nearby village of Mallwyd.
Mawddwy was also the only remaining part of the ancient Kingdom of Powys still ruled by members of the native royal family (of Powys Wenwynwyn) after 1309. On the division of the realm in 1293, Mawddwy had been awarded to William de la Pole (of Mawddwy) and his descendants. Eventually the ruling family in Mawddwy would expire in the male line in 1414. The Mawddwy Family who claim descent from William de la Pole still use a version of the traditional Lion of Powys as their arms.