The first mentally ill patients in Western Australia were cared for in temporary accommodation, including the wreck of the Marquis of Anglesey, the Fremantle Round House and in the Colonial Hospital. When convict transportation began in 1850, the numbers of people with mental illnesses in the colony began to increase. Official care began with the transfer of ten convicts from Fremantle Gaol to a new asylum located in Scots warehouse in November 1857.

Fremantle Asylum was completed and occupied in July 1865 and accommodated a wide range of patients. Initially most were male convicts, but gradually more patients were admitted from the civilian population. Common causes of admission were sunstroke, sexually transmitted diseases, alcoholism, delirium and diseases of old age. Patients could be admitted from anywhere in the colony. After proclamation of the Lunacy Act 1871, patients could be admitted by certification.

The Asylum was under the direction of a Surgeon Superintendent, and was administered jointly by the Imperial and colonial governments until 1886 when control was transferred to the colonial government. After the 1890's gold rushes, the Asylum became drastically overcrowded, forcing a reorganisation of facilities (including the purchase of Whitby Falls as an asylum farm in 1897) and plans for a much larger institution. Fremantle Lunatic Asylum was no longer used after 1909 once all patients had been transferred to the new Claremont Hospital for the Insane.