"to furnish with a battlement, render defensible," 1823, from crenel + -ate (2). Sometimes also crenellate; the double -l- seems to be from a presumed Latin *crenella as a diminutive of crena. Related: Crenelated, also crenellated; crenelation, crenellation (1849).
The Middle English verb for this was carnel (early 14c.), from the noun in Middle English and from Old French crenelé, from crenel.