The town first is first mentioned as Grecce or Grezze in the 11th century, when it had a castle. The castle has now disappeared except for a single tower, which is now the belfry of the church of S. Michele.
Greccio was the place where, in December 1223, St. Francis devised the first living crib (in Italian: presepe). The idea was to discourage would-be pilgrims to go to Bethlehem, as it was a risky adventure, the Holy Land being then under the control of the Turks. The tradition continues there to this day, and a memorial of St. Francis, the Santuario di S. Francesco, may be visited.