It is historically significant because its earliest origins can be traced back to the early days of the colony of New South Wales.

The colony needed to keep watch on the seas for potentially hostile ships or the Second Fleet, which meant that South Head became important as an observation post.

[3] A proper signal station was established in 1790; it was supplied by boat until a bridle trail was created along the ridge to South Head.

A semaphore system replaced flags at the signal station in the 1840s and the present building was constructed to a design by Colonial Architect Mortimer Lewis.

[4] In 1858, the first telegraph line in New South Wales was used to connect the signal station with the Royal Exchange in Bridge Street.