It was created to help solve aircraft supply issues which the Navy Department faced upon the entry of the U.S. into World War I.

On 27 July 1917 Secretary of the Navy Josephus Daniels approved the construction of the Naval Aircraft Factory as a means for the government to promote industry efficiency, ensure engineering expertise, and to monitor costs.

The increased need for flying boat construction during WWI meant expanding the factory into a final aircraft assembly plant, using civilian subcontractors to supply the components.

The change in focus resulted in the disuse of some production buildings, which were converted into storage depots for unused aircraft.

[2] In 1922-1923, the NAF fabricated the USS Shenandoah (ZR-1), although final assembly took place at Naval Air Station Lakehurst, New Jersey, where the only hangar in the United States large enough to house the airship was located.

[1]: 155, 162–185, 338–337 In the 1934 under the Vinson-Trammell Act (co-sponsored by Carl Vinson), it was decided that the Navy would build 10% of its own aircraft to stay abreast of modern manufacturing techniques and costs.

On 11 March 1942 Admiral Harold Rainsford Stark wrote "It is desired to proceed immediately with the steps necessary to adapt the 'drone' for warfare."

[1]: xiii, 210  In 1967, the NAF's aero engine research merged with the Naval Air Propulsion Test Center.