There is a record towards the end of the 16th century of endowments made by the Rev. Zacharye Babington, Vicar of Trellech, for the schools of Trellech and Penallt. A century later in 1688, at a Court Baron held at the Gockett Inn, a 'Mansion House' and some ten acres of land near Croes Vane were handed over in trust to Charles Probert of Trellech and John Jones of Penallt, the mansion to be used by Thomas Roberts of Penallt for his life, and thereafter to house 'the Free School of Penallt to instruct and inform poor children and buy books for 'em for ever'. In 1805 the Mansion is recorded as being used for the School and the land as being in the possession of the tenant of the Argoed. A School House was built in 1834 adjacent to St Mary's and the Glebe land attached to it is probably part of the original endowment. The School was handed over to the County Council in 1954. It closed in 1987 and later was vested in a newly-constituted trust, the Penallt Babington Educational Foundation.
The school was then restored by a local architect in 1997, using local craftsmen and artists, and retains all the essential character of the original building. It now provides holiday accommodation.