Scottish Water was carrying out the works at Philiphaugh on the outskirts of Selkirk whilst laying new pipes between Howden and Yarrowford.
A Scottish Borders Council's archaeologist said:
"It is an exciting discovery. It is not every day that medieval villages are found - most of them are known, this one was completely unknown."
More top news
Spells of rain overnight will give way to a sunny day tomorrow.
Visitors to Bassenthwaite who haven't yet visited the lake's popular ospreys only have a few weeks left to see them up-close.
Two new primary schools in the Borders have welcomed pupils for the first time today, Wednesday 16 August.