At the time of the foundation, settling in the Aragonese Extremadura was no easy task. The place was a frontier against the Muslim taifa of Valencia and an outpost for its conquest. In an insecure territory, such as that of Teruel in the 12th century, it was not easy to attract people willing to settle and defend it. The Aragonese monarchy had to endow the town with a charter that granted extensive privileges to the people who settled there and made it the head of a very large community of villages. In 1347, King Peter IV of Aragon, known as the Ceremonious, granted it the title of city.

The medieval period was a period of great development for Teruel, reaching the important figure of 6,000 inhabitants, but the great plagues of the Late Middle Ages, which so severely affected the kingdoms of the peninsula and the rest of Europe, meant a period of economic decline for Teruel and a significant drop in its population.

When in 1483 the Tribunal of the Inquisition was set up in the Aragonese domains the city of Teruel showed clear resistance to the before such a court. Partly because it was cutting back on its own privileges, but also because but also because the city's economy was largely in the hands those most likely to suffer the consequences.

In the 16th century, tensions were high in the city because of the local forces refused to accept Philip II's reform of the charter. During this period there was a strengthening of the church in Teruel. when the bishopric of Teruel was founded in 1577.