The townland the village is in was formerly known as Ballydonnelly ("Baile Ui Dhonnaile"), and was the stronghold of the O'Donnelly ("Ui Donnghaile") sept, who had held the role of marshalls to the O'Neills of Tyrone. According to Irish tradition the O'Donnellys were part of the Cenel Eogain making them kin of the O'Neills. In their role as Marshalls to the O'Neills they were responsible for fostering the children of 'The O'Neill'. The O'Donnellys reached the height of their role during the time of Shane O'Neill when Dean Terrence Danyell (Turlough O'Donnelly) of Armagh played a key role in communications between Shane O'Neill and Elizabeth I. The earliest mention of Ballydonnelly is the 'Annals of the Four Masters' in 1531 when it is said "Baile-Ui-Donnghaile was assaulted by Niall Oge, son of Art, son of Con O'Neill. He demolished the castle; and he made a prisoner of the son of O'Neill, who was foster-son of O'Donnelly, and carried him off, together with the horses and the other spoils of the town.”" At the Plantation Ballydonnelly was allocated as a 'Servitor' portion and as such was granted to Sir Toby Caulfeild who had served in the Crown forces during the 'Nine Years War'. The Castle to which the name refers is atypical of most Plantation structures in that it is not the more usual fortified tower house and was built by Sir Toby Caulfeild in the style of an Oxfordshire Manor House. Castle Caulfield was badly damaged by fire during the 1641 rebellion and was only reused in a limited capacity thereafter by the descendants of the Caulfeild family.