Although the city of Sarajevo had already had several football pitches with bleachers and stands (including the freshly built Koševo Stadium), it was decided by the Yugoslav communist authorities that resources are to be allocated towards construction of a new multi-sport facility for usage by various clubs under the umbrella of the SD Željezničar sports society.

Many of the club's supporters, friends, and members, including a number of Yugoslav People's Army (JNA) personnel helped in the construction of the football ground.

Grbavica began as a multi-use facility: in addition to football matches, competitions in cycling and athletics were organized.

The ground was officially opened on September 13, 1953 with the Yugoslav Second League western division match between Željezničar and RSD Šibenik.

In late June 1968, major improvements, additions, and renovations to the ground began, forcing its closure for the following eight years.

Throughout this period, the only competitive footballing contests played at Grbavica were a handful of Željezničar's European home matches, such as the 1968–69 Mitropa Cup semifinal versus Sklo Union Teplice in May 1969 as well as 1971–72 UEFA Cup clashes against Club Brugge, Bologna FC, and St Johnstone FC during fall 1971.

There were plans for the whole stadium to be remodeled and encircled to look like the newly built north stand, but they got shelved for the time being.

As a result of the renovations, in October 1987, Yugoslavia national football team (coached at the time by Željo legend Ivica Osim) played its first ever match at the stadium.

[9][10] Former club managers and players the likes of Amar Osim, Edin Džeko, Ibrahim Šehić and Semir Štilić among others, also donated.

[12][13] On 1 April 2017, Željezničar played host to Sloboda Tuzla during the Championship round of the 2016–17 Premier League season and on the day the newly built Eastern Stand opened to public.

By far the most notable match played at the stadium was the 1984–85 UEFA Cup semifinal return leg on Wednesday, 24 April 1985 between Željezničar and Hungarian visitors Videoton FC from Székesfehérvár.

However, disaster struck in the 87th minute when Videoton right back József Csuhay was left unmarked and scored a goal for 2–1 that took his team to the final and saw Željezničar's hopes dashed in the cruelest of fashions.