c. 1300, romaunce, "a story, written or recited, in verse, telling of the adventures of a knight, hero, etc.," often one designed principally for entertainment, from Old French romanz "verse narrative" (Modern French roman), also "the vulgar language," originally an adverb, "in the vernacular language," from Vulgar Latin *romanice scribere "to write in a Romance language" (one developed from Latin instead of Frankish), from Latin Romanicus "of or in the Roman style," from Romanus "Roman" (see Roman).
The sense evolution is because medieval vernacular tales (as opposed to Latin texts) usually told chivalric adventures full of marvelous incidents and heroic deeds. "The spelling with -aunce, -ance was very early adopted in English, probably on the analogy of abstract sbs." [OED].
In reference to literary works, in Middle English often meaning ones written in French but also applied to native compositions. The literary sense was extended by 1660s to "a love story, the class of literature consisting of love stories and romantic fiction." Meaning "imaginative, adventurous quality" first recorded 1801; that of "love affair" is from 1916. Romance novel is attested by 1820. Compare Romance (adj.).
late 14c., romauncen, "recite a narrative poem," from romance (n.) and also from Old French romancier "narrate in French; translate into French," from romanz (n.). Later "invent fictitious stories" (1670s), then "be romantically enthusiastic" (1849); meaning "court as a lover" is from 1938, probably from romance (n.). Related: Romanced; romancing.
mid-14c., "French; in the vernacular language of France" (contrasted to Latin), from Old French romanz "French; vernacular," from Late Latin Romanice, from Latin Romanicus (see Roman). Extended 1610s to other modern tongues in the south and west of Europe derived from Latin (Spanish, Italian, etc.); thus, collectively, "pertaining to the modern languages which arose out of the Latin of the provinces of Rome." Compare romance (n.).