Although bands had performed during the summer on the site where Babbacombe Theatre now stands, it wasn't until 1920 that a small bandstand was built. This was followed in 1935 by a larger structure with a canvas awning and although an improvement on the alfresco concerts the inevitable wind and rain did its worst, so in 1938 the Babbacombe Downs Concert Hall was built and it remained virtually unchanged for almost 50 years until the present management took over in 1986, when improvements started to be made to enable more lavish productions to be staged.

With the advent of World War II it was not long before entertainment had to give way to more important uses and the auditorium became a lecture hall for the air crew trainees of the RAF, although during this period there were various shows including those by ENSA and the RAF Flying Training Command Band. This wartime use was commemorated with a plaque presented by the local RAF Association, now on display in the theatre foyer.

Since the war the theatre had seen many years of successful summer shows and it has the reputation of hosting household names on the threshold of their careers, including in 1955/56 Bruce Forsyth, who headlined in the Hedley Claxton's 'Gaytime'. Other well known names include David Nixon, Ted Rogers, Ray Allen, Norman Vaughan and Roy Hudd.