Established in 1854 and rebuilt in 1886 to a design by noted Melbourne architect William Pitt, it is the oldest surviving entertainment site on mainland Australia.

Built in an elaborate Second Empire style, it reflects the opulence of the "Marvellous Melbourne" boom period, and had a number of innovative features, including state of the art electric stage lighting and the world's first sliding ceiling, which was rolled back on warm nights to give the effect of an open-air theatre.

[1] The site of today's Princess Theatre dates back to the gold rush period in 1854 as being a notorious entertainment district, when the Irish-American entrepreneur Tom Mooney constructed a barn-like structure called Astley's Amphitheatre.

When completed, it featured state-of-the-art electrical stage lighting, as well as Australia's first sliding or retractable roof and ceiling which provided ventilation from the auditorium.

During his time in 1901 the open balconies were enclosed to form larger lounges known as 'wintergardens', which feature large Art Nouveau stained glass windows with depictions of various classical composers.

A larger ground level foyer was created, and a new auditorium with fewer posts, in the Adam style, and the grand copper awning was added.

[10] For the following 12 years, often in association with other entrepreneurs, he presented an eclectic array of opera, ballet, musical comedy and drama, though he was constrained by the lack of an interstate circuit.

At the Princess in 1954 he hosted the National Theatre Movement’s gala performance of The Tales of Hoffmann for Queen Elizabeth II and Prince Philip.

Carroll often staged elaborate American musicals—among them Kismet (which he himself produced in 1954), The Sound of Music (1960), The King and I (1960) and Carousel (1964)—while they were still in their early months on Broadway, and tried unknown singers and actors.

For some years he maintained the pattern set by his father, but in 1969 the family company, Carroll Freeholds Pty Ltd, leased the Princess to the Australian Elizabethan Theatre Trust.

The refurbished theatre reopened on 9 December 1989 with the musical Les Misérables, followed by The Phantom of the Opera, which established a new record for the longest running show ever staged in Victoria.