After his return to Wessex, Aldhelm joined the community of scholars which had become established at Malmesbury, in Wiltshire, under St. Maeldulph; in imitation of whom, he embraced the monastic life. His stay was not, however, of long duration. He made a second visit to Kent and continued to attend the school of St. Adrian, until sickness compelled him to revisit the country of the West Saxons. He again sought the greenwood shades of Malmesbury and, after a lapse of three years, he wrote a letter to his old master Adrian, describing the studies in which he was occupied and pointing out the difficulties which he still encountered.

This was in AD 680. From being the companion of the monks in their studies, Aldhelm soon became their teacher and his reputation for learning spread so rapidly that the small society gathered around him at Malmesbury was increased by scholars from France and Scotland. He is said to have been able to write and speak Greek, to have been fluent in Latin and able to read the Old Testament in Hebrew. At this period, the monks and scholars appear to have formed only a voluntary association, held together by similarity of pursuits and the fame of their teacher. They do not appear to have been subjected to rules. How long they continued to live in this manner is uncertain. However, around AD 683, either at their own solicitation or by the will of the West Saxon monarch and the bishop, they were formed into a regular monastery under the rule of St. Benedict. Aldhelm was appointed their abbot.

Under Aldhelm, the abbey of Malmesbury continued, long, to be a seat of piety as well as learning and was enriched with many gifts by the West Saxon kings and nobles. Its abbot founded smaller houses in the neighbourhood, at Frome and Bradford-on-Avon. His church at the latter survives almost completely intact. At Malmesbury, Aldhelm found a small, but ancient, church, then in ruins, which he rebuilt, or repaired, and dedicated it to SS. Peter and Paul, the favourite saints of the Anglo-Saxons around that time. His biographers have preserved the verses which Aldhelm composed to celebrate its consecration.

Aldhelm was not a voluminous writer. The works, which alone have given celebrity to his name, are his two treatises on Virginity and his Aenigmata. He may, however, be considered the father of Anglo-Latin poetry; though he also composed in Anglo-Saxon. King Alfred the Great placed him in the first rank of the vernacular poets of his country and we learn, from William of Malmesbury, that, even as late as the 12th century, some ballads he had composed continued to be popular. To be a poet, it was then necessary to be a musician also and Aldhelm's biographers assure us that he excelled on all the different instruments then in use: the harp, fiddle and pipes included. Long after he became Abbot of Malmesbury, Aldhelm appears to have devoted much of his leisure time to music and poetry. King Alfred entered into his notebook, an anecdote which is peculiarly characteristic of the age and which probably belongs to the period that preceded the foundation of the Abbey. Aldhelm observed, with pain, that the peasantry, instead of assisting as the monks sung mass, ran about from house to house gossiping and could hardly be persuaded to attend to the exhortations of the preacher. Aldhelm watched the occasion and stationed himself, in the character of a minstrel, on the bridge over which the people had to pass. Soon he had collected a crowd of hearers, by the beauty of his verse, and, when he found that grabbed their attention, he gradually introduced, among the popular ballads he was reciting to them, words of a more serious nature. At length, he succeeded in impressing upon their minds a truer feeling of religious devotion; "Whereas if," as William of Malmesbury observes, "he had proceeded with severity and excommunication, he would have made no impression whatever upon them."

Few details of the latter part of Aldhelm's life have been preserved. We know that his reputation continued to be extensive. After he had been made Abbot of Malmesbury, he received an invitation from Pope Sergius I to visit Rome, and he is supposed to have accompanied Caedwalla, King of the West Saxons, who was baptized by that Pope, and died in the Eternal City in AD 689. He did not, however, remain abroad for long.

In AD 692, Aldhelm appears, from his letter on the subject quoted by his biographers, to have taken part, to a certain degree, in St. Wilfred's great controversy against the Celtic usages of the Northumbrian Church. Soon after this, he is found employed in the same dispute about the celebration of Easter, with the Britons of Cornwall. A synod was called by King Ine, about AD 700, to attempt a reconciliation between the remains of the ancient British Church in the extreme west with the Anglo-Saxon Church, and Aldhelm was appointed to write a letter on the subject to King Gerren of Dumnonia (by then reduced to Cornwall), which is still preserved. Five years later, upon the death of St. Haedda, the Bishopric of Wessex was divided into two dioceses, of which one, that of Sherborne, was given to St. Aldhelm, who appears to have been allowed to retain, at the same time, the Abbacy of Malmesbury. He soon rebuilt the church at Sherborne in fitting cathedral style, as well as helping to establish the nunnery of St. Mary at Wareham. He  spread the gospel amongst the local people and built churches at Langton Matravers and the Royal palace at Corfe; and the present Norman chapel on the windswept promontory of St. Aldhelm's Head, no doubt, replaces a Saxon original.  A popular old story tells how his preaching at one place was so inspiring that the people listened for hours. His ashen staff, which he had stuck in the ground, sprouted roots and leaves and grew into a fine ash tree. The place thus became known as Bishop's Tree (now Bishopstrow). 

Not long afterwards, on the 25th May AD 709, Aldhelm died at Doulting in Somerset. His body was carried to Malmesbury, where it was buried in the presence of Egwin, Bishop of Worcester. Stone crosses were placed as markers every seven miles along the route between the two towns and it was not long before his body was placed in a magnificent shrine and he was reverred as a saint. He is represented in art as a bishop playing his harp. He may also hold a staff bursting into leaf.