The preaching of St. Francis, as well as his example, exercised such a powerful attraction on people that many married men and women wanted to join the First or the Second Order, but this being incompatible with their state of life, Francis found a middle way and gave them a rule animated by the Franciscan spirit. In the composition of this rule St. Francis was assisted by his friend Cardinal Ugolino di Conti, (later Pope Gregory IX).

As to the place where the Third Order was first introduced nothing certain is known. The preponderance of opinion is for Florence, chiefly on the authority of Mariano of Florence, or Faenza, who cites the first papal bull known on the subject(Regesta pontificum). The less authoritative Fioretti assigns Cannara, a small town two hours' walk from the Portiuncula, as the birthplace of the Third Order. Mariano and the Bull for Faenza (16 December 1221) suggest that 1221 was the earliest date for founding of the Third Order. Thomas of Celano wrote that the oldest preserved rule was dated 1221.

Another story tells of Luchesio Modestini, a greedy merchant from Poggibonzi, who had his life changed by meeting Francis about 1213. He and his wife Buonadonna were moved to dedicate their lives to prayer and serving the poor. While many couples of that era who experienced a religious conversion chose to separate and enter monasteries, this couple felt called to live out this new way of life together. Francis was moved to write a Rule for them which would allow them to do so. Thus began the Brothers and Sisters of Penance in the Franciscan movement, which came to be called the Franciscan Third Order. The Chiesa della Buona Morte in the city of Cannara, (Church of the Good Death, previously named, "Church of the Stigmata of S. Francesco") claims to be the birthplace of the Third Order. Another contender from the same city is the Church of S. Francesco. 

This way of life was quickly embraced by many couples and single men and women who did not feel called to the stark poverty of the friars and nuns, especially widows. They zealously practiced the lessons Francis had taught them concerning prayer, humility, peacemaking, self-denial, fidelity to the duties of their state, and above all charity. Like Francis himself, they cared for lepers and outcasts. Even canonical hermits were able to follow this Rule and bring themselves into the orbit of the Franciscan vision. The Order came to be a force in the medieval legal system, since one of its tenets forbade the use of arms, and thus the male members of the order could not be drafted into the constant and frequent battles cities and regions waged against one another in that era.