In 1883, a group of railroad surveyors headed by S. L. Dolson and David Loring arrived in Rock Point, near present-day
 They were charged with finding the best route through the
Rogue Valley for the
Oregon and California Railroad. Citizens of neighboring
Jacksonville hoped that it would pass between their town and Hanley Butte, near the present day
Claire Hanley Arboretum. Such a move would have all but guaranteed prosperous growth for Jacksonville, but Dolson decided instead to stake the railroad closer to
 The response from Jacksonville was mixed,
 but the decision was final. By November 1883, a
depot site had been chosen and a surveying team led by Charles J. Howard was hard at work platting the new town. They completed their work in early December 1883, laying out 82 blocks for development.
James Sullivan Howard, a merchant and surveyor,
 claimed to have built the town's first building in January 1884,
 though blacksmith Emil Piel was advertising for business at the "central depot" in the middle of December 1883.
 Others point out the farms of town founders Iradell Judson Phipps and Charles Wesley Broback, which were present before the town was platted.
 Regardless, on February 6, 1884 (less than a month after it was built), J. S. Howard's store became Medford's first post office, with Howard serving as
postmaster. The establishment of the post office led to the incorporation of Medford as a town by the
Oregon Legislative Assembly on February 24, 1885,
 and again as a city in 1905. Howard held the position of postmaster for Medford's first ten years, and again held the post upon his death on November 13, 1919.
The beginning of the 20th century was a transitional period. Medford built a new steel bridge over Bear Creek to replace an earlier one which washed away three years before. Without a bridge, those wanting to cross had to
ford the stream, typically using a horse-drawn wagon; the first automobile did not arrive in Medford until 1903.
 Pharmacist George H. Haskins had opened a drugstore just after the town was platted, and in 1903 he allowed the Medford Library Association to open a small library in that store. Five years later the library moved to Medford's new city hall, in another four years,
Andrew Carnegie's donation allowed a dedicated library to be built. Construction on the
Medford Carnegie Library was completed in 1912.
In 1927, Medford took the title of county seat of
Jackson County away from nearby Jacksonville.
Interstate 5 was completed immediately adjacent to downtown Medford to replace the Oregon
Pacific Highway. It has been blamed for the decline of small businesses in downtown Medford since its completion,
 but nevertheless remains an important route for commuters wishing to travel across the city. In fact, a study completed in 1999 found that 45% of vehicles entering I-5 from north Medford heading south exited in south Medford, just three miles (5 km) away.
The high volume of traffic on Interstate 5 led to the completion of a new north Medford interchange in 2006. The project, which cost about $36 million, improved traffic flow between I-5 and
Crater Lake Highway.
 Further traffic problems identified in south Medford prompted the construction of another new interchange, costing $72 million. The project began in 2006 and was completed in 2010.
Since the 1990s, Medford has dedicated an appreciable amount of resources to
urban renewal in an attempt to revitalize the downtown area.
 Several old buildings have been restored, including the
Craterian Ginger Rogers Theater and the Prohibition era Cooley-Neff Warehouse, now operating as Pallet Wine Company, an urban winery. Streets have been realigned, new sidewalks, traffic signals, and bicycle lanes were installed, and two new parking garages have been built. Downtown Medford also received a new library building to replace the historic Medford Carnegie Library and now boasts satellite campuses for both
Southern Oregon University.
Economic problems in 2008 and 2009 put a hold on The Commons project, a collaboration between the city of Medford and
 The project, one of the largest undertaken in downtown in recent years, aims to provide more parking, recreation, and commerce to the area. Before the work stopped, the
Greyhound Bus depot was moved and $850,000 was spent replacing water lines. The Commons is anchored by the new corporate headquarters of Lithia Motors, Inc. (NYSE: LAD). Included in The Commons are two public park blocks slated to be informal public gathering areas as well as an area for special events such as the farmer's market. Ground breaking for the project was April 22, 2011, with a Phase 1 completion date of 2012.