Madison Square comprises part of a land grant made by the Spanish Government to Joaquin Menchaca on March 10, 1778. I.A. Paschal and Nat Lewis, both of whom lived in the area, acquired part of the Menchaca grant in the middle of the 19th century for a residential development called Upper San Antonio. The subdivision was platted and surveyed for Paschal and Lewis by H.S. Upshur in 1847.

According to the original plat of Upper San Antonio, Paschal and Lewis set aside one block of land -- the northern portion of the park as a public square. At that time the block was bounded by Second Avenue (Lexington), Fourth Street (Camden), Third Avenue (Baltimore) and Third Street (Dallas). By the time the plan for Upper San Antonio was filed in the Bexar County deed records in May 1869, the southern portion of the park bounded by Lexington, Dallas, Richmond and Camden was set aside as dedicated ground. (The two blocks were originally numbered 17 and 18, and later renumbered as City Blocks 798 and 807.) Paschal and Lewis owned the Upper San Antonio land jointly until 1857 when they divided the lots. After Paschal died in 1869, the remainder of his property was sold to settle his estate.

By 1881, City Council minutes indicate that Madison Square had been named, though the date and origin of the name have not yet been located. The Council committed $100 to improve the park "and the money was to be spent by a citizens' committee appointed by those who have subscribed to this matter of the subscribers would provide $200." This early public/private partnership was apparently successful and led to further improvements. In April 1882, citizens petitioned City Council for the cultivation of trees, construction of gravel walks, installation of gates and grubbing of weeds at a cost of $100. In 1884, lamps and water lines were added to the park. The City Council voted in March 1885 to hire a man to care for Madison Square for three months at a cost of $30 a month. In July 1885, citizens petitioned to continue this appropriation and the request was referred to the Mayor. It is not known if the request was ever approved and few references appear in City Council minutes to Madison Square in subsequent years.