Olsztyn was founded in the place which offered natural protection provided on both sides by the bank of the Łyna. The defensive advantages of the river's bight were supported with digging a moat on the remaining two sides and surrounding the city with a zone of fortifications including three gates and about a dozen towers. The stockade was built stage by stage to finally join it with the walls of the Warmian Chapter Castle that was built in the years 1347-53 on the western side of the planned city.

The first location of Olsztyn was established in 1353. As part of the second one in 1378, the original plan was expanded towards the north. By the end of the XIVth century, the bounds of the walls had been closed and the city remained within this area practically till the first years of the XIXth century. It was at this time that the demolition of the damaged stockade was started and the construction exceeded the borders set by these walls.

The remains of the city's fortification indicate the current area of the Old City. The only element of this fortification which has remained complete is the immense Gothic Wysoka Brama (the High Gate) which serves as the northern entrance to the Old Town. From the south, a similar role was performed by Brama Dolna (the Lower Gate) which was located close to the Saint John's Bridge but was demolished at the beginning of the XIXth century. The most western bridgehead is provided by the castle, which is preserved in a good state and currently is the place of the Museum of Warmia and Masuria. Near the castle hulks the Neo-Gothic evangelical church of Jesus Christ the Saviour built in the years 1876-77. From the east, the area of the Old-Town buildings was closed with the monumental Gothic church of Saint James, the construction of which was finished, after decades, at the turn of the XIV and the XVth century.

A Gothic monument adorns also the Old Town marketplace located in the central part of the founding. It is Stary Ratusz (the Old City Hall), the oldest wing of which was built at the end of the XIVth century and was reconstructed in a different shape after fire in 1623-24. Nowadays, the whole building is used by the Voivodeship Municipal Library.

The marketplace is surrounded on all four sides by the frontage of XVIIth and XVIIIth century tenement houses (with arcades on three sides). After the damage caused by the Second World War, these houses were rebuilt in a different shape and usually made higher by another storey, giving them Baroque features and decorating them with modern ornaments.

The oldest among them is "Burmistrzówka" in which have been preserved elements from the XIVth century. It is said to have been the house of the locator and the first village leader – Jan of Łajsy. Several tens of metres farther stands the tenement house in which the architect Erich Mendelsohn was born (1887-1953).

The youngest part of the Old Town buildings is the complex of stylized tenement houses built in 2002 near the Fish Market. This market had been undeveloped till the end of the Second World War.

The ground floor and the higher storeys of these tenement houses are usually used nowadays as trade and gastronomic establishments.

The Old Town is the centre of the Olsztyn social and cultural life, especially during summer when the majority of events related to the Olsztyńskie Lato Artystyczne (Olsztyn Artistic Summer) are held here. The amphitheatre of Czesław Niemen, which is at the foot of the castle, becomes the main stage for these events, as well as the marketplace, the Fish Market, and the atmospheric streets.