Medaryville was laid out in 1852, just ahead of the construction of the New Albany and Salem Railroad, later called the Monon Railroad. The town was sited at the intersection of the railroad and the old Rensselaer to Winamac Road, now State Road 14. The "proprietors" of the new town were Josiah Walden and William Clark, and they were assisted by Carter Hathaway, who was a surveyor, lawyer, politician, and entrepreneur. Hathaway's ornate map of the little town of Medary Ville was recorded in March 1852, at the Pulaski County Courthouse. The town was most likely named after Samuel Medary, an Ohio newspaper editor and politician who moved west with the settlers and was the last governor of the Minnesota Territory before it gained statehood. 'Medary' was also a common given name in Carter Hathaway's family. He named his son 'Richard Medary', and his brother Richard named his son 'Medary Montez'.
Today, the railroad comes into Medaryville from the south, but the tracks end just north of Pearl Street. The town has always been a commercial rail shipping center for agricultural products, and a large grain storage and shipping complex remains today. Approximately 600 people reside in present-day Medaryville.