In 1878 the State Lunatic Hospital at Danvers was erected, under the supervision of prominent Boston architect Nathaniel J Bradlee, in an extremely rural, out-of-the-way location.The immediate crisis which precipitated the building of a mental hospital north of Boston was the imminence in the early 1870's of the closing of the facility at South Boston. In 1873, Worcester, Taunton and Northampton and the 1866 Tewksbury Asylum for chronic patients were already housing 1300 patients in buildings designed for 1000; another 1200 were scattered about in various other hospitals.

While the hospital was originally established to provide residential treatment and care to the mentally ill, its functions expanded to include a training program for nurses in 1889 and a pathological research laboratory in 1895. By the 1920's the hospital was operating school clinics to help determine mental deficiency in children. During the 1960's as a result of increased emphasis on alternative methods of treatment and deinstitutionalization and community based mental health care, the inpatient population started to decrease. Danvers State Hospital closed on June 24, 1992 due to budget cuts within the mental health system.

Dr. Thomas Story Kirkbride, who served the Pennsylvania Hospital as the superintendent from 1841-1883 created a humane and compassionate environment for his patients, and believed that beautiful settings restored patients to a more natural "balance of the senses". Dr. Kirkbride's progressive therapies and innovative writings on hospital design along with management became known as the Kirkbride Plan, which influenced, in one form or another, almost every American state hospital by the turn of the century including Danvers.