It was part of an extensive tract of land purchased from Massachusetts about 1790 by Jonathan Phillips of Boston, then acquired by his agent, Jacob Abbott from Wilton, New Hampshire.

[3] Although Madrid's northern topography is mountainous, other parts suited cultivation.

Industry developed because the falls in the Sandy River provided water power for mills: these included three sawmills, a gristmill, two clapboard machines, and two shingle machines.

[4] But in the late 20th century, the population declined, as industry changed and the young moved to larger cities.

Citing "apathy", its government was dissolved, and Madrid became part of the unorganized territory of East Central Franklin.

18.1% of all households were made up of individuals, and 5.6% had someone living alone who was 65 years of age or older.

None of the families and 5.5% of the population were living below the poverty line, including no under eighteens and 29.4% of those over 64.