diff --git a/README.rst b/README.rst
index 4281c87d1f80..595fb5ff62a6 100644
--- a/README.rst
+++ b/README.rst
@@ -312,6 +312,9 @@ We recommend using the demo which starts 3 federated instances running on ports
 
 (to stop, you can use `./demo/stop.sh`)
 
+See the [demo documentation](https://matrix-org.github.io/synapse/develop/development/demo.html)
+for more information.
+
 If you just want to start a single instance of the app and run it directly::
 
     # Create the homeserver.yaml config once
diff --git a/changelog.d/12143.doc b/changelog.d/12143.doc
new file mode 100644
index 000000000000..4b9db74b1fc9
--- /dev/null
+++ b/changelog.d/12143.doc
@@ -0,0 +1 @@
+Improve documentation for demo scripts.
diff --git a/demo/.gitignore b/demo/.gitignore
index 4d1271234312..5663aba8e758 100644
--- a/demo/.gitignore
+++ b/demo/.gitignore
@@ -1,7 +1,4 @@
-*.db
-*.log
-*.log.*
-*.pid
-
-/media_store.*
-/etc
+# Ignore all the temporary files from the demo servers.
+8080/
+8081/
+8082/
diff --git a/demo/README b/demo/README
deleted file mode 100644
index a5a95bd19666..000000000000
--- a/demo/README
+++ /dev/null
@@ -1,26 +0,0 @@
-DO NOT USE THESE DEMO SERVERS IN PRODUCTION
-
-Requires you to have done:
-    python setup.py develop
-
-
-The demo start.sh will start three synapse servers on ports 8080, 8081 and 8082, with host names localhost:$port. This can be easily changed to `hostname`:$port in start.sh if required.
-
-To enable the servers to communicate untrusted ssl certs are used. In order to do this the servers do not check the certs
-and are configured in a highly insecure way. Do not use these configuration files in production.
-
-stop.sh will stop the synapse servers and the webclient.
-
-clean.sh will delete the databases and log files.
-
-To start a completely new set of servers, run:
-
-    ./demo/stop.sh; ./demo/clean.sh && ./demo/start.sh
-
-
-Logs and sqlitedb will be stored in demo/808{0,1,2}.{log,db}
-
-
-
-Also note that when joining a public room on a different HS via "#foo:bar.net", then you are (in the current impl) joining a room with room_id "foo". This means that it won't work if your HS already has a room with that name.
-
diff --git a/demo/clean.sh b/demo/clean.sh
index e9b440d90dfd..7f1e1920215a 100755
--- a/demo/clean.sh
+++ b/demo/clean.sh
@@ -4,6 +4,9 @@ set -e
 
 DIR="$( cd "$( dirname "$0" )" && pwd )"
 
+# Ensure that the servers are stopped.
+$DIR/stop.sh
+
 PID_FILE="$DIR/servers.pid"
 
 if [ -f "$PID_FILE" ]; then
diff --git a/demo/start.sh b/demo/start.sh
index 8ffb14e30add..55e69685e3c2 100755
--- a/demo/start.sh
+++ b/demo/start.sh
@@ -6,8 +6,6 @@ CWD=$(pwd)
 
 cd "$DIR/.." || exit
 
-mkdir -p demo/etc
-
 PYTHONPATH=$(readlink -f "$(pwd)")
 export PYTHONPATH
 
@@ -21,22 +19,26 @@ for port in 8080 8081 8082; do
     mkdir -p demo/$port
     pushd demo/$port || exit
 
-    #rm $DIR/etc/$port.config
+    # Generate the configuration for the homeserver at localhost:848x.
     python3 -m synapse.app.homeserver \
         --generate-config \
-        -H "localhost:$https_port" \
-        --config-path "$DIR/etc/$port.config" \
+        --server-name "localhost:$port" \
+        --config-path "$port.config" \
         --report-stats no
 
-    if ! grep -F "Customisation made by demo/start.sh" -q "$DIR/etc/$port.config"; then
-        # Generate tls keys
-        openssl req -x509 -newkey rsa:4096 -keyout "$DIR/etc/localhost:$https_port.tls.key" -out "$DIR/etc/localhost:$https_port.tls.crt" -days 365 -nodes -subj "/O=matrix"
+    if ! grep -F "Customisation made by demo/start.sh" -q "$port.config"; then
+        # Generate TLS keys.
+        openssl req -x509 -newkey rsa:4096 \
+          -keyout "localhost:$port.tls.key" \
+          -out "localhost:$port.tls.crt" \
+          -days 365 -nodes -subj "/O=matrix"
 
-        # Regenerate configuration
+        # Add customisations to the configuration.
         {
-            printf '\n\n# Customisation made by demo/start.sh\n'
+            printf '\n\n# Customisation made by demo/start.sh\n\n'
             echo "public_baseurl: http://localhost:$port/"
             echo 'enable_registration: true'
+            echo ''
 
 			# Warning, this heredoc depends on the interaction of tabs and spaces.
 			# Please don't accidentaly bork me with your fancy settings.
@@ -63,38 +65,34 @@ for port in 8080 8081 8082; do
 
             echo "${listeners}"
 
-            # Disable tls for the servers
-            printf '\n\n# Disable tls on the servers.'
+            # Disable TLS for the servers
+            printf '\n\n# Disable TLS for the servers.'
             echo '# DO NOT USE IN PRODUCTION'
             echo 'use_insecure_ssl_client_just_for_testing_do_not_use: true'
             echo 'federation_verify_certificates: false'
 
-            # Set tls paths
-            echo "tls_certificate_path: \"$DIR/etc/localhost:$https_port.tls.crt\""
-            echo "tls_private_key_path: \"$DIR/etc/localhost:$https_port.tls.key\""
+            # Set paths for the TLS certificates.
+            echo "tls_certificate_path: \"$DIR/$port/localhost:$port.tls.crt\""
+            echo "tls_private_key_path: \"$DIR/$port/localhost:$port.tls.key\""
 
             # Ignore keys from the trusted keys server
             echo '# Ignore keys from the trusted keys server'
             echo 'trusted_key_servers:'
             echo '  - server_name: "matrix.org"'
             echo '    accept_keys_insecurely: true'
-
-			# Reduce the blacklist
-			blacklist=$(cat <<-BLACK
-			# Set the blacklist so that it doesn't include 127.0.0.1, ::1
-			federation_ip_range_blacklist:
-			  - '10.0.0.0/8'
-			  - '172.16.0.0/12'
-			  - '192.168.0.0/16'
-			  - '100.64.0.0/10'
-			  - '169.254.0.0/16'
-			  - 'fe80::/64'
-			  - 'fc00::/7'
-			BLACK
+            echo ''
+
+			# Allow the servers to communicate over localhost.
+			allow_list=$(cat <<-ALLOW_LIST
+			# Allow the servers to communicate over localhost.
+			ip_range_whitelist:
+			  - '127.0.0.1/8'
+			  - '::1/128'
+			ALLOW_LIST
 			)
 
-            echo "${blacklist}"
-        } >> "$DIR/etc/$port.config"
+            echo "${allow_list}"
+        } >> "$port.config"
     fi
 
     # Check script parameters
@@ -141,19 +139,18 @@ for port in 8080 8081 8082; do
 			    burst_count: 1000
 			RC
 			)
-            echo "${ratelimiting}" >> "$DIR/etc/$port.config"
+            echo "${ratelimiting}" >> "$port.config"
         fi
     fi
 
-    if ! grep -F "full_twisted_stacktraces" -q  "$DIR/etc/$port.config"; then
-        echo "full_twisted_stacktraces: true" >> "$DIR/etc/$port.config"
-    fi
-    if ! grep -F "report_stats" -q  "$DIR/etc/$port.config" ; then
-        echo "report_stats: false" >> "$DIR/etc/$port.config"
+    # Always disable reporting of stats if the option is not there.
+    if ! grep -F "report_stats" -q  "$port.config" ; then
+        echo "report_stats: false" >> "$port.config"
     fi
 
+    # Run the homeserver in the background.
     python3 -m synapse.app.homeserver \
-        --config-path "$DIR/etc/$port.config" \
+        --config-path "$port.config" \
         -D \
 
     popd || exit
diff --git a/docs/SUMMARY.md b/docs/SUMMARY.md
index ef9cabf55524..21f80efc9998 100644
--- a/docs/SUMMARY.md
+++ b/docs/SUMMARY.md
@@ -82,6 +82,7 @@
   - [Release Cycle](development/releases.md)
   - [Git Usage](development/git.md)
   - [Testing]()
+    - [Demo scripts](development/demo.md)
   - [OpenTracing](opentracing.md)
   - [Database Schemas](development/database_schema.md)
   - [Experimental features](development/experimental_features.md)
diff --git a/docs/development/demo.md b/docs/development/demo.md
new file mode 100644
index 000000000000..4277252ceb60
--- /dev/null
+++ b/docs/development/demo.md
@@ -0,0 +1,41 @@
+# Synapse demo setup
+
+**DO NOT USE THESE DEMO SERVERS IN PRODUCTION**
+
+Requires you to have a [Synapse development environment setup](https://matrix-org.github.io/synapse/develop/development/contributing_guide.html#4-install-the-dependencies).
+
+The demo setup allows running three federation Synapse servers, with server
+names `localhost:8080`, `localhost:8081`, and `localhost:8082`.
+
+You can access them via any Matrix client over HTTP at `localhost:8080`,
+`localhost:8081`, and `localhost:8082` or over HTTPS at `localhost:8480`,
+`localhost:8481`, and `localhost:8482`.
+
+To enable the servers to communicate, self-signed SSL certificates are generated
+and the servers are configured in a highly insecure way, including:
+
+* Not checking certificates over federation.
+* Not verifying keys.
+
+The servers are configured to store their data under `demo/8080`, `demo/8081`, and
+`demo/8082`. This includes configuration, logs, SQLite databases, and media.
+
+Note that when joining a public room on a different HS via "#foo:bar.net", then
+you are (in the current impl) joining a room with room_id "foo". This means that
+it won't work if your HS already has a room with that name.
+
+## Using the demo scripts
+
+There's three main scripts with straightforward purposes:
+
+* `start.sh` will start the Synapse servers, generating any missing configuration.
+  * This accepts a single parameter `--no-rate-limit` to "disable" rate limits
+    (they actually still exist, but are very high).
+* `stop.sh` will stop the Synapse servers.
+* `clean.sh` will delete the configuration, databases, log files, etc.
+
+To start a completely new set of servers, run:
+
+```sh
+./demo/stop.sh; ./demo/clean.sh && ./demo/start.sh
+```
diff --git a/docs/federate.md b/docs/federate.md
index 5107f995be98..df4c87da51e2 100644
--- a/docs/federate.md
+++ b/docs/federate.md
@@ -63,4 +63,5 @@ release of Synapse.
 
 If you want to get up and running quickly with a trio of homeservers in a
 private federation, there is a script in the `demo` directory. This is mainly
-useful just for development purposes. See [demo/README](https://github.com/matrix-org/synapse/tree/develop/demo/).
+useful just for development purposes. See
+[demo scripts](https://matrix-org.github.io/synapse/develop/development/demo.html).