It's quite true! And (a fact that should be much more widely known) it was started by none other than P.T. Barnum!
The final iteration of Barnum's American Museum burned down in 1868, but that doesn't mean that he was "out of the museum business" as many have claimed (he later backed Bunnell's), or that his footprint in New York ended then, either. In 1874 he leased a plot of land belonging to Commodore Cornelius Vanderbilt at the corner of East 26th Street and Madison Avenue. President Madison had died in 1836; the naming of the Avenue and the Square (located at the intersection of Fifth Avenue, Broadway, and 23rd Street) after him followed not long after.
On Vanderbilt's vacant lot (former site of a train depot), Barnum built his Great Roman Hippodrome, a.k.a. Barnum's Monster Classical and Geological Hippodrome. It was basically a roofless arena with an oval track in the middle, and hundreds of wooden benches for spectators. He used the space primarily to present his circus extravaganzas.
In 1876, bandmaster Patrick Gilmore took over the lease and used the space as more of a pleasure garden, in the tradition of Niblo's. Gilmore's Garden presented band concerts, dog shows, flower shows, temperance meetings, revivals, pedestrian marathons, and boxing matches (advertised as "exhibitions" since the sport was illegal). After Gilmore, an entrepreneur named W. M. Tileston offered classes in equestrianism there, presented an ice carnival, and sponsored tennis matches.
William Kissam Vanderbilt took over the management of the space directly in 1879 after the passing way of his grandfather the Commodore. It was the first of four arenas known to be known as "Madison Square Garden". He ran the increasingly ramshackle original arena for a decade.

The second Madison Square Garden opened in 1890 and was built by a consortium that included Barnum, J. P. Morgan, Andrew Carnegie, and W. W. Astor. Easily the most beautiful of the four MSGs, it was designed by Stanford White in the "Moorish" Beaux-Art style then in vogue, with a racy statue of Diana sculpted by Saint-Gaudens atop one of the turrets. White himself was murdered in the Garden's rooftop nightclub in 1906, shot by the jealousy-maddened Harry K. Thaw in a tiff over his wife Evelyn Nesbit. Musicals and operas were presented at this incarnation of the Garden, as well as orchestral concerts, balls, and circuses. But increasingly it also became associated with sporting events, perhaps particularly the famous annual Six Day Bicycle Race, which launched in 1899. This was also the iteration of the Garden that Will Rogers performed at with Colonel Zach Mulhall's rodeo on his first trip to New York.
In 1926, New York Life (which now owned the mortgage on the Garden, tore it down to build the New York Life Building. Designed by Cass Gilbert in the same Gothic Revival style as The Woolworth Building, it still stands at the edge of Madison Square Park to this day. Meaning that future Madison Square Gardens...would no longer be at Madison Square.

Impresario and sports promoter Tex Rickard built the third Garden in 1925, backed by a consortium of investors he called the "600 millionaires". Though designed by famed theatre architect Thomas Lamb it was a definite step backwards in aesthetics. Its mission had taken a hard turn away from the "Pleasure Garden" idea, as well...indeed this is the point at which the venue's name became sort of a joke, for neither was it a Garden, nor was it any longer located at the place advertised by the name. Indeed, it was WAY uptown, between 49th and 50th Streets on Eight Avenue, current side of Worldwide Plaza. The Knicks and the Rangers made the Garden their home base during these years, and the Six Day Bike Race, boxing, wrestling and circuses were all presented there regularly. Sonja Henie's ice show played there, as did a rodeo starring Gene Autry. Major political conventions were held there, and there were rallys organized by groups ranging from the Nazi-Friendly German-American Bund, to the emphatically anti-Nazi American Jewish Congress, to the Communist Party USA. It's also where JFK's 1962 birthday party was held, the one where Marilyn Monroe sang "happy birthday".
By that time, the owners of MSG had brought the air rights to a third location to bring into the era of the fourth garden:

This ugliness, this...beige toilet opened its doors to the public in 1968. To accommodate this blight, the previous, gorgeous Penn Station was torn down, spawning New York's preservation movement, although it was born to late to save Penn. In recent decades it has been widely acknowledged that the current Garden is not just an eyesore, but a hindrance to the growth of Penn Station. Since transportation is an actual need, and manifested in permanent infrastructure (and the Garden can be located anywhere) most agree that the needs of the train station ought to come first. Various proposals to transplant it have been floated. The Hudson Yards, for example, has been spoken of as a promising place to move it. At present, though city and state elected officials, the various railroads, the media and others have all been pressuring MSG to move (and their present permit to do business at their present location only extends to 2028), the MSG owners have heretofore refused to budge.
As someone who uses Penn Station all the time, and was last in MSG about 20 years ago, it's an easy call for me! Move the Garden again! No only is necessary, it's also well past time if previous history is any barometer!
For more on show biz history, consult No Applause, Just Throw Money: The Book That Made Vaudeville Famous.
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