The Commonwealth Solar Observatory was established in January 1924 on the southwestern outskirts of Canberra following representations from physicist and astronomer Dr Walter Duffield (the first Director of the CSO), the Australian Solar Physics Committee, the Royal Society and others, who selected Mount Stromlo after testing proved it to be a suitable site for the purpose.

Astronomical observations had actually been carried out at Mount Stromlo in the previous decade with the Oddie telescope which had been installed at Mount Stromlo in 1911. The dome built to house it was the first federal building in the newly established Australian Capital Territory.

By 1950 the Observatory's name had changed, becoming the Commonwealth Observatory. During the 1950s the observatory experienced its greatest acquisition of telescopes, with no fewer than four major instruments installed there. In 1957 the observatory became part of the Australian National University as the Department of Astronomy in the Research School of Physical Sciences.

In January 2003 the observatory was heavily impacted by bushfires that devastated the southwest of Canberra. The fires destroyed the workshops, administration building, eight staff homes and seven telescopes, including the Oddie Refractor. The only telescope that was not destroyed was the Farnham Telescope, built in 1886 and installed at the observatory in 1928.

Parts of the observatory have been rebuilt, with Mount Stromlo remaining the headquarters of the ANU Research School of Astronomy & Astrophysics and welcoming visitors, however all of the ANU's large research telescopes now operate out of the ANU’s Siding Spring Observatory near Coonabarabran in northern NSW.