According to this page (from which the rough map location shown here is taken):
When Charnel chapel, St. Paul’s, was taken down by the Protector Somerset, in 1549, more than 1,000 cart-loads of bones were removed to Finsbury Fields, where they formed a large mound, on which three windmills were erected. It was from these mills that the street obtained its name. (Leigh Hunt.)
The Wikipedia page on nearby Bunhill Fields also says:
…in about 1549, cart-loads of human bones were periodically brought here — some one thousand loads in total — to make space in St Paul’s charnel house for new interments. The dried bones were simply deposited on the moor and capped with a thin layer of soil, leading to such topographical elevation of the otherwise damp, flat fens, that three windmills could safely be erected in a spot that came to be known as Windmill Hill.
Related, Wikipedia has a long list of all the historical locations of windmills in what is now Greater London.