After the residents were moved to Bagot Reserve in 1939, the Army established a temporary tent hospital on the site, however under these conditions, dengue fever was rife.

[3] With the outbreak of war in Europe, military leaders grew concerned about Japanese aggression in the Pacific and requested the Federal government commit to building a new permanent hospital in Darwin as a priority.

Some equipment was loaned by the Australian and United States Army, while the hospital ship Manunda was also sent to Darwin to support the build up of military personnel in the city.

[3] Despite being clearly marked by red crosses painted on the roof, Ward 1 and a number of nearby staff residences at the new hospital were damaged when eight bombs landed in the vicinity at around 10:05 am during the first Japanese air raids on the city on 19 February 1942.

[3] Other works that had been planned before the war, including landscaping and sealing of access roads were finally completed in 1950,[2] but many staff were forced to live in war-time Army huts until well into the 1960s.

Amid fears that the lack of sanitation would lead to outbreaks of disease, the Director of Health recommended the city be evacuated while infrastructure was rebuilt.

[3] A temporary clinic was set up in the evacuation centre at Darwin High School to treat the injured and administer vaccinations to those waiting for flights to the southern states.

60 beds were retained at Darwin hospital, including geriatric and psychiatric units, as well as some outpatient rehabilitation services, administration and training facilities.

[2] Although it was forecast that the hospital would continue to operate until at least 1985 in an auxiliary capacity,[11] with improvements to community health services such as home-based nursing, the number and duration of admissions declined.

[18] The expensive museum proposal proved extremely unpopular with the community, and the plans were abandoned in 2018, despite an architectural firm being engaged to design the building.