The Cave was discovered by accident in August of 1742 by workmen erecting a bench in a butter market in Mercat House (since demolished). A millstone was found in the ground, which when lifted disclosed a vertical, well-like shaft, about 2ft (60cm) diameter and 16ft (4.8m) deep. Toeholds had been cut in the chalk on opposite sides to form steps. A small boy was "volunteered" to make the first descent. It was found that the Cave was more than half filled with earth and "debris".
The domed ceiling, now bricked and grilled, was complete and partly tiled. It was said to have been within a foot (30cm) of the surface of the road. Also noted was the existence of what is now called the East Shaft; an opening then almost closed by several courses of clunch blocks painted red to look like bricks of which only two or three courses now remain. It is believed to have been a chimney or an air vent.
In the expectation of finding buried treasure the shaft was enlarged and the Cave was emptied quickly, uncovering the carvings in the lower part of the chamber. There was no scientific archaeological investigation made at the time but according to the Rev. G. North who visited the Cave shortly after its discovery the contents included, apart from earth, some decayed bones and a skull, fragments of a small drinking cup and a small unmarked piece of brass. The millstone, which covered the entrance, is now in two pieces, one forming the last step of the present entrance, the other lying alongside. The original entrance is closed and now lies under the road.
Early visitors came down the original (north) entrance with the help of ladders but in 1790 the present entrance was made by Thomas Watson, the owner of what was then called the Town House on the opposite, north side, of Melbourn Street. He was a bricklayer and in the cold winter of 1790 there was nothing for his men to do, so they were set to work cutting the 72ft (22m) long tunnel between the Town House and the only place in the cave wall not covered with carvings. Mr. Watson was able to charge 6 pence for each visit, an appreciable sum in those days. He also effectively took over the cave and ever since then cave and house have been in common ownership as "The Cave House and Estate".
In 1964 the Cave, Grade I listed by English Heritage, was leased from the then owners by Royston Town Council who installed the railings and lighting. The History Society monitored humidity and temperature for a full year and found that the humidity was always high and the temperature steady at 10°C (50°F).