The theatre was constructed in 1885 as a timber building by the joiner Thomas Whittaker as a permanent home for Myer's Grand American Hippodrome Circus, on Henshaw Street.

After an auction of fittings together with scenery, props and costumes from the former theatre, it reopened on 26 October 1931 with two American films, Sea Devils and The Sunrise Trail, only to close permanently on 3 January 1932.

They had the façade modernised by architects Armitage & Fazakerly, built new dressing rooms on the site of the stable block, and created a new stage out of part of the auditorium;[1] the capacity was reduced from the original 3,000 to 670 (334 stalls, 206 circle and 130 gallery).

[1] The building was renovated in 1964–66 to replace the remaining timber sections with masonry, remove the projection box, add a new proscenium and a safety curtain, and further modernise the exterior.

[1][4] In late 2022 Arts Council England announced the withdrawal of the Coliseum's annual grant; it was the largest theatre outside London to lose funding.

On 14 February 2023 the board of trustees announced that running the theatre full time was no longer financially viable, so they were entering a period of consultation with the intention of closing at the end of March.

[7] The council planned to replace the building with a smaller theatre at a cost of £24 million, but after a campaign led by actor Julie Hesmondhalgh, on 8 July 2024 it was announced that the Coliseum would instead be refurbished with £10 million in pledged funds, and would reopen by Christmas 2025.