The Gaiety was originally built in 1893 to the design of John Rennison (architect of the Sefton Hotel in Douglas) and commissioned by Thomas Lightfoot (who was the originator of the Douglas Horse tramway) and C.F. Maley who owned the plot. It was then known as the Marina. Six months after opening the consortium was declared bankrupt and it was bought out of auction and renamed the Pavilion. There were 4 entertainment companies all making losses and in 1898 they embarked on "The Great Amalgamation Scheme". The 4 companies, including The Pavilion Ltd went into voluntary liquidatioin and then jointly formed the Palace and Derby Castle Group. They then commissioned the renowned Theatre architect Frank Matcham to convert the building into an Opera House and Theatre. The Gaiety opened on July 16th 1900 with a West End production of "The Telephone Girl" starring Miss Ada Blanche and her company. 

The most successful period of the Gaiety was between 1900 and 1914, also boom years for the Islands tourism industry.

Frank Matcham was born in Newton Abbot , Devonshire in 1854, the son of a well to do Brewery Manager. After receiving a good education at Babacombe, Frank was offered an apprenticeship to Mr. George.S. Bridgeman, a local architect, being a keen student he developed quickly and discovered his love and subsequent talent for theatre architecture. The young Frank then went to work in the practice of Jethro T. Robinson who was Consulting Theatre Architect to the Lord Chamberlain.

The years between 1870 & 1880 proved to be very productive for Frank and his practice , elevating him to the position of the most fashionable and sought after theatre architect in the country. The name Matcham stood for elegance, spectacle, comfort and above all a sense of glamour and occasion for the theatre going public.

At the age of 55 Frank went into semi-retirement and in May 1920 he died of heart failure.

The First World War brought an end to the Edwardian era and a change in the whole way of British Life. The future was not to be easy and despite the installation of cinema equipment in the 20's and experiments like the 1938 ice show, the theatre became less and less commercial and the owners less inclined to spend the large sums necessary to maintain the fabric of the building. Time appeared to be running out when in 1971 the Isle Of Man Government acquired the freehold of the Gaiety and by 1976 set about the mammoth task of restoration. The architect in charge of the first phase of the project Victor Glasstone proved a most fortunate choice both for the Gaiety and the Isle Of Man. With very limited resources he recommended that everything possible should be done to put the Gaiety back as near as possible to its original scheme of decoration. This was taken on board in a major way by Mervin Stokes who was employed by the theatre in various capacities for over 30 years until 2007.

The Friends of the Gaiety was formed in 1979 with the mission of raising funds to help restore the theatre to its 1900 glory

Mervin, as General Manager of the theatre, along with the Department of Tourism and the Friends of the Gaiety, was instrumental in launching the 10 year restoration project. With the generous guidance of theatre consultant Dr. David Wilmore and Charles Sentance (Chairman of the restoration sub-committee), the result to date shows what a fantastic job has been done by everyone involved. An important part of the Islands heritage has been preserved for future generations. The theatre is currently a thriving centre for the performing arts on the Isle of Man and hosts all sorts of events both professional and amateur.