The surrounding area of Madona had been populated in earlier times, which is confirmed by discoveries of old burial grounds in the city's vicinity. Madona is first mentioned in writing in 1461, when Archbishop Sylvester began renting the lands of Birži Manor. However, the Swedish government placed the land under state control. After the Great Northern War, Madona became property of the Russian Empire. Empress Elizabeth presented Birži Manor along with other of Vidzeme's manors to Count Alexander Buturlin.
Empress Catherine II bought the lands back as a present to another relative of her court — the Serbian major-general Maxim Zorić. From the 19th to the beginning of the 20th century, the location of Madona was the fields of Birži Manor.
According to one version, the name of Madona stems from the adjacent Madona Lake. According to another version, Madona got its name from Birži Manor, which German exonym is Madohn or Modohn. For this reason, the railway station situated at the Pļaviņas - Valka narrow gauge railway line was named Madona as well. The populated place that slowly emerged around the station also got this name after the erection of the Madona railway station in 1903.
Village privileges was given to Madona 1 July 1921, and town privileges 7 June 1926. Since 1 April 1925 Madona was the center of the newly founded Madona parish. Madona had 1,357 inhabitants at the time
