The town was founded in 1157 by Berchtold IV von Zähringen. Its name is derived from German frei (free) and Burg (fort). Its most ancient part is conveniently located on a former peninsula of the River Sarine, protected on three sides by steep cliffs. The easily defended city helped the Dukes of Zähringen to strengthen and extend their power in the Swiss plateau in the area between the Aar and the Saane/Sarine.Beginning at the time of its inception, Fribourg built a city-state; initially, the land it controlled lay some distance away. When the dukes of Zähringen died out in 1218, the city was transferred to the related Kyburg family. They granted the city its former privileges and wrote the municipal laws in the so-called Handfeste in 1249, in which the legal, institutional and economic organizations were established. Several treaties with neighbouring city-states, including Avenches (1239), Bern (1243), and Murten (Morat) (1245), were signed at this time.
The city was sold to the Habsburgs in 1277. Trade and industry began as early as the mid-13th century. In the early period, Fribourg consisted of four distinct inner city districts: Burg, Au, Neuenstadt (La Neuveville), and Spital. The city developed rapidly, which led to its first expansion: the Burg district expanded to the west in 1224, a town was established across the river in 1254, and in 1280 development began near Place Python. These expansions reflect the economic boom in Fribourg. The 14th century was dominated by trade, and cloth and leather production, which brought the city renown in Central Europe by 1370. In 1339, Fribourg participated alongside the Habsburgs and the County of Burgundy in the Battle of Laupen against Bern and its Swiss Confederacy allies.