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
Police are searching for the owners of two dogs which attacked and injured a terrier, while it was being walked by its 70-year-old owner.
Fraudsters are posing as company bosses to take tens of thousands of pounds from businesses in Dumfries and Galloway.
Dozens of volunteers at the Keswick Mountain Festival have been repairing fells damaged by last December's floods.