A one thousand acre property for Whitby Falls Hospital was purchased from a William Paterson by the State government in 1897 for the sum of 7, 000 pounds. Fremantle Asylum by this time had become over-crowded and it was decided to move some psychiatric patients to Whitby Falls. The farmhouse on the property was renovated to accomodate 50 patients and the first 12 patients were placed there on 12 July 1897.

Despite a proclamation on 12 September 1900 declaring Whitby Falls an asylum, it was eventually deemed too remote a location and a new asylum was built at Claremont instead.

Whitby Falls Hospital became an auxiliary to Claremont Hospital and a cooperative dairy farm and cattle breeding program was implemented by the two hospitals.

In 1914, Whitby Falls was gazetted a home for male alcoholics under the Inebriates Act 1912. The Hospital reverted again to take psychiatric patients from Claremont in 1918.

Due to the small number of patients at Whitby Falls Hospital, the Under Secretary declared in 1932 that "as an institution Whitby hardly justified it's existence (financially)" and it was declared "first and foremost a farm". Whitby's agricultural program was used as occupational therapy and rehabilitation for patients placed there but it also became a profitable operation that included poultry, dairy, vegetable, orchard, piggery and beef production.

In 1958, the government built a new hospital on the grounds of Whitby Falls. The original farmhouse was left unused until demolition in 1971.

In 1972, Claremont Hospital was divided into Graylands Hospital and Swanbourne Hospital. Whitby Falls became an annexe to Graylands and was de-gazetted from being an approved hospital to a hostel. The Armadale Health Service supplied psychiatric and allied health services to the hostel from the 1980's.

(Administrative history reference: Mental Hospitals Department, "Whitby Falls Mental Hospital, Control and Development of", file 23/1964, State Records Office of WA, consignment 3614).