During the Middle Ages, a castle was built on the peninsula near the village for the Lords of Matten. In 1146, King Conrad III gave Interlaken Abbey one quarter of the village. Over the following years, the Abbey attempted to expand their power in the village. After the Swiss Confederation gained de facto independence from the House of Habsburg, the Abbey remained a strong supporter of the Austrian dynasty. The Abbey launched several raids into Unterwalden to support Habsburg ambitions. In response, in 1342, troops from Unterwalden attacked and burned Iseltwald. A few years later, in 1348-49, the village unsuccessfully rebelled against the Abbey. In 1528, the city of Bern adopted the new faith of the Protestant Reformation and began imposing it on the Bernese Oberland. Iseltwald joined many other villages and the Abbey in an unsuccessful rebellion against the new faith. After Bern imposed its will on the Oberland, they secularized the Abbey and annexed all the Abbey lands.