In 1847 the Commanding Royal Engineer Lieutenant Colonel James Gordon was instructed to commence work on a graving dock, which was designed by the Sydney civil engineer, Captain Gother Mann. Mann was then stationed on the island to supervise construction using convict labour.
The dock, called Fitzroy Dock, was constructed between 1851 and 1857. On completion the dockyard was handed over to the Department of Lands and Public Works and was managed from 1859 to 1904 by the Department of Public Works. It then became a government trading enterprise under a Superintendent, A E Cutler, formerly an officer of the Department of Public Works. In 1913 the whole island was taken over by the Commonwealth.
The dockyard facilities had been gradually expanded, being used mainly for Royal Navy and other government work. Building of small ships began about 1870. The Sutherland Dock was commenced in 1882, designed by J.B. McKenzie under the direction of E.O. Moriarty, Engineer-in-Chief for Harbours and Rivers. When completed in 1890 it was the largest dock in the world and would accommodate any ship in service (though not the Great Eastern which was by then laid up).
The dockyard became the Commonwealth Naval Dockyard in 1913, and in 1914 John King Salter, an experienced shipbuilder and one of the principal officers at the Chatham Dockyard became General Manager. By 1919 there were 4000 employees. During World War I the dockyard built three destroyers and a cruiser, including the boilers and turbines, an impressive achievement. Immediately after the war the dockyard completed another cruiser and a program of refits, and built several merchant ships. The two dry docks were busy.
Control of the dockyard passed in 1921 to the Commonwealth Shipbuilding Board of Control. Over the next few years, as the shipbuilding program came to an end, there was increasing difficulty in finding sufficient work, largely because the dockyard was not permitted to compete against commercial firms for engineering work.
In 1933 the government leased the dockyard to an Australian company, the Cockatoo Docks and Engineering Company, and the restrictions on competing were largely removed. The British company Vickers Limited acquired a majority of the shares in 1947.
During World War II the dockyard was busy with shipbuilding, and became the major ship repair facility in the Western Pacific. It also built machinery and at one point was delivering boilers for naval ships at the rate of two per week. The work force reached 3000 in 1942. After the war the building of naval vessels continued steadily until the early 1960s, by which time the dockyard was looking for other work.
One of its projects in the 1960s was the 12,000 ton Empress of Australia, launched in 1964. In 1984 the last ship, HMAS Success, an 18,000 ton naval supply ship, was launched. The workshops continued to have a steady flow of heavy engineering work for industry, including repairs to turbines and other rotating machinery.
In 1971 the dockyard commenced its most technically complex program, refitting the Oberon Class submarines. On completion of its last submarine refit in 1991, the dockyard closed.
In late 1991 most of the equipment was sold at auction, and subsequently most of the buildings were demolished. The two docks were flooded. The power house building and its contents are intact, but there is little remaining evidence of the scope and scale of the industrial activities that once filled the island.