The settlement arose in the 10th century, at the crossroad of the trade routes from Görlitz to Żagań and from Guben to Legnica. The medieval chronicler Thietmar of Merseburg (975–1018) mentioned a castle of "Ilva", where in 1000 AD the Polish duke Bolesław I Chrobry met with Emperor Otto III on his journey from the canonization of Bishop Adalbert of Prague to the Congress of Gniezno. As a result of the fragmentation of Poland, from the 12th century onwards, the border fortress was controlled by the Piast dukes of Silesia. Iłowa's inhabitants took part in the 1241 Battle of Legnica against the invading Mongols.