Under The Navigation Act of 1876, the master of any ship entering a Queensland port with gunpowder to be unloaded, had to ensure that it was placed in a government magazine.

Magazines were constructed of stone, brick, timber, iron or concrete, often dependent on the local availability of materials.

By 1900, magazines under the control of the Marine Department were situated at Brisbane, Maryborough, Bundaberg, Gladstone, Rockhampton, Bowen, Townsville, Cairns, Cooktown and Normanton.

Cooktown had been established in October 1873 as the Endeavour River port for the Palmer, and developed almost overnight as a supply and administrative centre.

Within six months of its establishment, the town had 20 restaurants, 12 large and 20 smaller stores, 6 butchers, 5 bakers, 3 tinsmiths, and chemists, fancy-goods shops, watchmakers, bootmakers and saddlers; 65 publican's licenses had been issued for the Cooktown–Palmer River district, with 30 more applied for by April 1874.

For safety reasons, the structure was to be located at the rocks by the sea at the northern edge of Grassy Hill, a considerable distance from the pilot station.

Local agitation led to a road being made along the seafront to the magazine, and Webber Esplanade was extended around the northern edge of Grassy Hill in the mid-1880s.

By the late 1880s a number of dwellings had been erected at the base of Grassy Hill in the vicinity of the magazine, and the local volunteer defence force had installed a gun nearby.

Despite an 1889 recommendation by Foreman McMillan of the Works Department that the magazine be removed two or three miles up the railway line from the port, this did not eventuate.

[1] From the mid-1880s alluvial output from the Palmer River goldfields declined, and money to develop the extensive reefs in the district was not forthcoming.

By 1894 the amount of explosives stored in the Cooktown Powder Magazine was very small, and little was being expended on maintaining the building.

The Queensland Government gave approval for foreshore reclamation and the construction of a rock wall to prevent further erosion.

[2] The magazine is situated above high water mark, away from the centre of Cooktown, at the northern edge of Grassy Hill at the mouth of the Endeavour River.

The place contains good evidence of 1870s construction techniques for this special type of building use - especially the pegged timber floors, heavy hardwood framing, and small windows.