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
A look ahead at the forecast for the Border region.
Artefacts uncovered from a Viking burial site in Cumwhitton have went on display in Carlisle's Tullie House thanks to a £50,000 grant
Members of the Lake District Ski Club, based on Raise Fell near Hellvelyn, have been taking the Alpine past time to Cumbria. See the pics: