The town is believed to have been founded by the Counts of Andechs probably around the mid-12th century, but was first mentioned in 1194 as Baierrute in a document by Bishop Otto II of Bamberg. The syllable -rute may mean Rodung or "clearing", whilst Baier- indicates immigrants from the Bavarian region.

Already documented earlier, were villages later merged into Bayreuth: Seulbitz (in 1035 as the royal Salian estate of Silewize in a document by Emperor Conrad II) and St. Johannis (possibly 1149 as Altentrebgast). Even the district of Altstadt (formerly Altenstadt) west of the town centre must be older than the town of Bayreuth itself. Even older traces of human presence were found in the hamlets of Meyernberg: pieces of pottery and wooden crockery were dated to the 9th century based on their decoration.

While Bayreuth was previously (1199) referred to as a villa (village), the term civitas ("town") appeared for the first time in a document published in 1231. One can therefore assume that Bayreuth was awarded its town charter between 1200 and 1230. The town was ruled until 1248 by the counts of Andechs-Merania. After they died out in 1260 the burgraves of Nuremberg from the House of Hohenzollern took over the inheritance. Initially, however, their residence and the centre of the territory was the castle of Plassenburg in Kulmbach. The town of Bayreuth developed slowly and was affected time and again by disasters.

As early as 1361 Emperor Charles IV had conferred on Burgrave Frederick V the right to mint coins for the towns of Bayreuth and Kulmbach.

Bayreuth was first published on a map in 1421.

In February 1430, the Hussites devastated Bayreuth and the town hall and churches were razed. Matthäu Merian described this event in 1642 as follows:"In 1430 the Hussites from Bohemia attacked / Culmbach and Barreut / and committed great acts of cruelty / like wild animals / against the common people / and certain individuals. / The priests / monks and nuns they either burnt at the stake / or took them onto the ice of lakes and rivers / (in Franconia and Bavaria) and doused them with cold water / and killed them in a deplorable way / as Boreck reported in the Bohemian Chronicle, page 450"((Source: Frühwald (Hg.): Fränkische Städte und Burgen um 1650 based on texts and engravings by Merian, Sennfeld 1991.)

By 1528, less than ten years after the start of the Reformation, the lords of the Frankish margrave territories switched to the Lutheran faith.

In 1605 a great fire, caused by negligence, destroyed 137 of the town's 251 houses. In 1620 plague broke out and, in 1621, there was another big fire in the town. The town also suffered during the Thirty Years War.

A turning point in the town's history came in 1603 when Margrave Christian, the son of the elector, John George of Brandenburg, moved the aristocratic residence from the castle of Plassenburg above Kulmbach to Bayreuth. The first Hohenzollern palace was built in 1440-1457 under Margrave John the Alchemist. It was the forerunner of today's Old Palace (Alter Schloss) and was expanded and renovated many times. The development of the new capital stagnated due to the Thirty Years' War, but afterwards many famous baroque buildings were added to the town. After Christian's death in 1655 his grandson, Christian Ernest, followed him, ruling from 1661 until 1712. He was an educated and well-travelled man, whose tutor had been the statesman Joachim Friedrich von Blumenthal. He founded the Christian-Ernestinum Grammar School and, in 1683, participated in the liberation of Vienna which had been besieged by the Turks. To commemorate this feat, he had the Margrave Fountain built as a monument on which he is depicted as the victor of the Turks; it now stands outside the New Palace (Neuer Schloss). During this time, the outer ring of the town wall and the castle chapel (Schlosskirche) were built.

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