It was the seat of Owain Glyndŵr's Welsh Parliament in 1404, and as such claims to be the "ancient capital of Wales". However, it has never held any official recognition as a capital. From 1536 to 1974 it lay in the historic county of Montgomeryshire (Sir Drefaldwyn). It applied for city status in the 2000 and 2002 competitions.
Machynlleth hosted the National Eisteddfod in 1937 and 1981.
The weekly market and biannual fair thrived, and in 1613 drew complaints from other towns whose trading in cloth was being severely affected. A document dated 1632 shows that animals for sale came from all over Merionethshire, Montgomeryshire, Cardiganshire, Carmarthenshire and Denbighshire, and prospective buyers came from Flintshire, Radnorshire, Brecknockshire, Herefordshire and Shropshire, in addition to the above.
Dyfi Bridge was first mentioned in 1533, by Geoffrey Hughes, "Citizen and Merchant taylour of London" who left £6 13/4 "towards making of a bridge at the toune of Mathanlleth". By 1601 "Dyfi bridge in the Hundred of Mochunleth" was reported to be insufficient, and the current one was built in 1805 for £250. Fenton describes it in 1809 as "A noble erection of five large arches. The piers are narrow and over each cut-water is a pilaster, a common feature of the eighteenth century".
On 29 November 1644, a Civil War battle took place near Dyfi Bridge between Oliver Cromwell's New Model Army, commanded by Sir Thomas Myddelton of Chirk Castle, and the Royalists. A great many were killed and Mathrafal was burnt down on same day. Many houses in Machynlleth occupied by Royalists were also burned down.
From 1859 to 1948 the town was served by the narrow-gauge Corris Railway, which brought slate from the quarries around Corris and Aberllefenni for onward despatch to the markets. The railway's Machynlleth station building, built in 1905, can still be seen alongside the road approaching the town from the north.
Machynlleth main-line station was built by the Newtown and Machynlleth Railway, and continues to provide a link to Aberystwyth and the Cambrian coast to the west and Newtown and Shrewsbury to the east.
The daughter of local landowner Sir John Edwards married Viscount Seaham, the second son of the third Marquess of Londonderry, and they set up home in Plas Machynlleth. He became Earl Vane on the death of his father and the fifth Marquess on the death of his half-brother. To celebrate the 21st birthday of their eldest son, Viscount Castlereagh, the townspeople subscribed to the erection (at the town's main road intersection) of the Clock Tower, which has become widely known as the symbol of Machynlleth. The tower, which stands on the site of the old Town Hall, is the first thing many visitors will notice. The foundation stone was laid on 15 July 1874 amid great festivities. Another son, Lord Herbert Vane-Tempest, was the last member of the family to live at the Plas and was killed in the Abermule train collision on the Cambrian Railways, of which he was a director. The house was given to the townspeople after World War II. In recent years it was converted into the Celtica visitor centre.
Machynlleth retains its strong Welsh character to this day, and you will hear Welsh spoken everywhere alongside English. Figures from the 2001 Census indicate that some 70%(1961:82%) of the population have some knowledge of Welsh with 42% able to read, write and speak the language.
Even with the current closure of Celtica the primary employment sector remains tourism with a wide range of activity based attractions (for example several mountain biking trails) as well as visitor centres (Centre for Alternative Technology). Agriculture clearly continues to play a significant part in the make-up of the town and surrounding area as well. Another important local industry and employer is the renewable energy sector. The area now has a rapidly-expanding renewable energy industry with several small to medium sized companies now operating in or around the town.