The theatre was built in 1887, near Fountain's Court, on the site of a former public house, the Old Coal Hole, and was designed by Walter Emden for the publican, Charles Wilmot and a Dr Web.

[1] Edward Terry, as owner-manager, opened the theatre on 17 October 1887, with the farce The Churchwarden, followed by The Woman Hater.

He achieved considerable success with his own production of Arthur Wing Pinero's Sweet Lavender, which opened at Terry's Theatre on 21 March 1888 and ran for 683 performances, producing a £20,000 profit.

[4] In 1894, Edward Laurillard became manager of the theatre, producing King Kodak, opening on 30 April 1894, with music by Alfred Plumpton and lyrics by Arthur Branscombe[5] and a score by Walter Slaughter.

During the Christmas season, 1897–98, a series of matinees consisting of short musicals for children by Basil Hood and Walter Slaughter played with much success at the theatre.

[7][8] With Frederick Mouillot installed as manager, My Lady Molly, a comic opera, ran for 342 performances between 14 March 1903–16 January 1904.