It was built by the British Army in 1779 as Fort Lernoult, and was ceded to the United States by the terms of the Jay Treaty in 1796, following up on the original terms of the peace agreement of the Treaty of Paris that ended the American Revolutionary War (1775-1783), 13 years earlier when the British held on to continuing occupying several fortifications on the new American-Canadian international border.

Fort Shelby was later returned to and occupied finally by the United States after Jay's Treaty of 1796, negotiations and ratification further settled outstanding issues with the former Mother Country, including continued British occupation of border fortifications on American soil, a decade after the Revolutionary War ended, despite the terms of the subsequent peace of the second Treaty of Paris of 1783, recognizing the Independence of the United States.

In the fall of 1778, Captain Richard Lernoult, the commander of the British Army at Fort Detroit, feared that the existing encampment would not be sufficient to defend against the oncoming American forces.

Work commenced on the project in November 1778, and although construction was beset by problems due to severe weather, by October 1779 a total of 381 British troops were stationed at the new fort.

Following Hull's retreat to the other side of the Detroit River, British General Isaac Brock set up artillery batteries in what is now Windsor, Ontario, directly opposite the fort.

[6] On the morning of August 15, 1812, Brock sent a demand to Hull, with an implicit threat of massacre at the hands of his Indian allies: Sir, The force at my disposal authorizes me to require of you the immediate surrender of Fort Detroit.

It is far from my inclination to join in a war of extermination, but you must be aware that the numerous body of Indians, who have attached themselves to my troops, will be beyond my control the moment the contest commences.

Following their defeat in the naval battle, and with General William Henry Harrison advancing on Detroit with 1,000 troops, the British retreated to the Canadian side of the river.