The house was founded by Robert D'Oyly the younger, Norman governor of Oxford, prompted by his wife, Edith Forne, who, to expiate the sins of her former life as the mistress of Henry I, solicited her husband to this pious work with a story of the chattering of magpies, interpreted by a chaplain as souls in Purgatory who needed the foundation of a monastery to expiate their sins.

Osney was (along with St Osyth, Cirencester, Llanthony, and Holy Trinity, London), one of the great Augustinian Canon Regular houses of medieval England.

The most significant event in the history of the abbey came in April 1222 when the Synod of Oxford met there, charged with applying the Lateran decrees in England.

Otto himself was locked for safety in the abbey tower, emerging unscathed to lay the city under interdict in reprisal.

Drawings of the remains were commissioned by John Aubrey in 1640, and the much reduced ruins were later drawn by Thomas Hearne of St Edmund Hall in 1720.