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Ludlow was home to various trades, and in 1372 boasted 12 Trade Guilds including metal workers, shoemakers, butchers, drapers, mercers, tailors, cooks, and bakers. There were also merchants of moderate wealth in the town and especially wool-merchants, such as Laurence of Ludlow, who lived at nearby Stokesay Castle. The collection and sale of wool and the manufacture of cloth continued to be the primary source of wealth until the 17th century. Drovers roads from Wales led to the town.

This prosperity is expressed in stone and stained-glass as St. Laurence's parish church It is a wool church and the largest in Shropshire. Despite the presence of someDecorated work it is largely Perpendicular in style.

The town also contained several coaching inns such as the old Angel, pubs and ale houses, leading to court records of some alcohol-induced violence and a certain reputation for excess. Several coaching inns were constructed to accommodate travellers by stagecoach and mail coach. The oldest surviving inn today is the 15th century Bull Hotel.

During the War of the Roses, Richard, Duke of York, seized the castle and turned it into one of his main strongholds. The Lancastrian forces captured Ludlow in 1459, but at the end of the conflict in 1461 the castle became property of the Crown and passed to Richard's son, Edward IV. The town was then incorporated as a borough. Edward set up the Council of Wales and the Marches in 1473 and sent his son, Edward, Prince of Wales, to live there, as nominal head of the Council. It was at Ludlow that the prince heard the news of his father's death and was himself proclaimed King Edward V of England. Under Henry VII the castle continued as the headquarters of the Council of Wales and served as the administration centre for Wales and the counties along the border, the Welsh Marches. During this period, when the town served as the effective capital of Wales, it was home to many messengers of the king, various clerks, and lawyers for settling legal disputes. The town also provided a winter home for local gentry, during which time they attended the Council court sessions. Henry also sent his sickly heir Prince Arthur to Ludlow, where he was joined briefly by Henry's wife Catherine of Aragon. Ludlow Castle was the site of the controversial wedding night, when the question of marriage consummation became the crux of Catherine and Henry VIII's annulment. After 1610, the cloth industry declined but the wealth of the town was little effected until about 1640, when the activities of the Council were suspended and the town's population promptly fell by 20%. Eventually, the Council resumed and except for brief interludes, Ludlow continued to host the Council until 1689, when it was abolished by William and Mary. The castle then fell into decay. The structure was poorly maintained and stone was pillaged. In 1772 demolition was mooted, but it was instead decided to lease the buildings. Later still it was purchased by the Earl of Powis, and together, he and his wife directed the transformation of the castle grounds. From 1760, the population began to undergo a significant expansion. New structures were built along the outskirts that would become slums in the 19th century and later, torn down. In 1832 a doctor, and amateur geologist, from Ludlow began studying the rock deposits to the south-west of the town, along the River Teme and on Whitcliffe and in Ludford. The bottom layer of the rocks forming the four divisions of the Silurian period became identified as the Ludlow Group Bone Bed to the world of geology. This was a thin layer of dark sand containing numerous remains of early fish, especially their scales, along with plant debris, spores and microscopic mites laid down as sediments in a shallow tropical sea some 400 Million years ago. Whitcliffian is a term used worldwide for rocks of this age in modern geology to this day. The site is now an SSSI (Site of Special Scientific Interest).