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
Windy and colder. Rain or showers - some of which will be wintry on hills with some snow settling over highest ground. Some sunshine around
The Carlisle United Trust has voted overwhelmingly in favour of proposals to bring a £1.26 million investment to the club.
Cumbria Police has defended its decision to spend one £1.8 million on replacing traditional notebooks with new electronic devices.