Madison was first established as Boone Court House. It was burned during the American Civil War and was then incorporated in 1906 and named for Colonel William Madison Peyton, a pioneer coal operator, who was a leader in the movement which resulted in the formation of Boone County. Madison is the "Gateway to the Coalfields."
As of the census of 2000, there were 2,677 people, 1,191 households, and 783 families residing in the city. The population density was 479.1 people per square mile (184.9/km²). There were 1,319 housing units at an average density of 236.1/sq mi (91.1/km²). The racial makeup of the city was 94.81% White, 4.18% African American, 0.04% Native American, 0.41% Asian, 0.07% from other races, and 0.49% from two or more races. Hispanic or Latino of any race were 0.26% of the population.
There were 1,191 households out of which 25.4% had children under the age of 18 living with them, 50.9% were married couples living together, 12.0% had a female householder with no husband present, and 34.2% were non-families. 31.7% of all households were made up of individuals and 12.8% had someone living alone who was 65 years of age or older. The average household size was 2.24 and the average family size was 2.79.
In the city the population was spread out with 20.7% under the age of 18, 7.2% from 18 to 24, 24.5% from 25 to 44, 30.1% from 45 to 64, and 17.5% who were 65 years of age or older. The median age was 44 years. For every 100 females there were 84.4 males. For every 100 females age 18 and over, there were 81.5 males.
The median income for a household in the city was $29,911, and the median income for a family was $37,232. Males had a median income of $31,389 versus $23,160 for females. The per capita income for the city was $18,309. About 18.2% of families and 21.4% of the population were below the poverty line, including 31.8% of those under age 18 and 11.7% of those age 65 or over.