The village was founded and built by its own inhabitants, mainly farmers and craftsmen, with the function of a castrum, or control post. This is why the definition of Castle is in the name and an observation tower is sited at the highest point of the hillside on which it stands.
Postignano's position was of great strategic importance, being exactly at the crossroads between Spoleto, Norcia, Foligno and Assisi. During the following centuries, the village experienced a remarkable period of economic stability, being a key centre for the processing and trade of iron and hemp in Umbria. In 1611, the population totalled 235 inhabitants.