The hospital was authorized by the Virginia General Assembly in the early 1850s as the Trans-Allegheny Lunatic Asylum. Following consultations with Thomas Story Kirkbride, then-superintendent of the Pennsylvania Hospital for the Insane, a building in the Kirkbride Plan was designed in the Gothic Revival and Tudor Revival styles by Richard Snowden Andrews (1830-1903), an architect from Baltimore whose other commissions included the Maryland Governor's residence in Annapolis and the south wing of the U.S. Treasury building in Washington. Construction on the site, along the West Fork River opposite downtown Weston, began in late 1858. Work was initially conducted by prison laborers; a local newspaper in November of that year noted "seven convict negroes" as the first arrivals for work on the project. Skilled stonemasons were later brought in from Germany and Ireland. Construction was interrupted by the outbreak of the American Civil War in 1861. Following its secession from the United States, the government of Virginia demanded the return of the hospital's unused construction funds for its defense; before this could occur, the 7th Ohio Volunteer Infantry seized the money from a local bank, delivering it to Wheeling, where it was put toward the establishment of the Reorganized Government of Virginia, which sided with the northern states during the war. The Reorganized Government appropriated money to resume construction in 1862; following the admission of West Virginia as a U.S. state in 1863, the hospital was renamed the West Virginia Hospital for the Insane. The first patients were admitted in October 1864, but construction continued into 1881. The 200-foot (61 m) central clock tower was completed in 1871, and separate rooms for black people were completed in 1873. The hospital was intended to be self-sufficient, and a farm, dairy, waterworks, and cemetery were located on its grounds, which ultimately reached 666 acres in area. A gas well was drilled on the grounds in 1902. Its name was again changed to Weston State Hospital in 1913.

Originally designed to house 250 patients in solitude, the hospital held 717 patients by 1880; 1,661 in 1938; over 1,800 in 1949; and, at its peak, 2,400 in the 1950s in overcrowded conditions. A 1938 report by a survey committee organized by a group of North American medical organizations found that the hospital housed "epileptics, alcoholics, drug addicts and non-educable mental defectives" among its population. A 1949 series of reports by The Charleston Gazette found poor sanitation and insufficient furniture, lighting, and heating in much of the complex, while one wing, which had been rebuilt using Works Progress Administration funds following a 1935 fire started by a patient, was comparatively luxurious.

By the 1980s, the hospital had a reduced population due to changes in the treatment of mental illness. In 1986, then-Governor Arch Moore announced plans to build a new psychiatric facility elsewhere in the state and convert the Weston hospital to a prison. Ultimately the new facility, the William R. Sharpe Jr. Hospital, was built in Weston and the old Weston State Hospital was simply closed, in May 1994. The building and its grounds have since been mostly vacant, aside from local events such as tours (no longer inside the building), fairs and church revivals. In 1999, all four floors of the interior of the building were damaged by paintball players; participants in the vandalism were found to include at least twenty local police officers and employees of area law enforcement agencies.

Efforts toward adaptive reuse of the building have included proposals to convert the building into a Civil War Museum and a hotel and golf course complex. A non-profit 501(c)3 organization, the Weston Hospital Revitalization Committee, was formed in 2000 for the purpose of aiding in preservation of the building and finding appropriate tenants. Three small museums devoted to military history, toys, and mental health, respectively, were opened in the first floor of the building in 2004, but were soon forced to close due to fire code violations.

The hospital was auctioned by the West Virginia Department of Health and Human Resources on August 29, 2007. Joe Jordan, an asbestos demolition contractor from Morgantown, was the high bidder and paid $1.5 million for the hospital and grounds. Bidding started at $500,000. Joe Jordan has begun maintenance projects on the former hospital grounds. In October of 2007,a Fall Fest was held at the Weston State Hospital. Guided daytime tours were offered as well as a haunted hospital tour at night, a haunted hayride and a treasure hunt starting on the hospital front porch. Family hayrides, arts and crafts and local music were also offered. In 2008, The group TAPS was called to the hospital to conduct an investigation at the request of Joe Jordan due to purported claims of paranormal activity on the grounds. The owners are now offering haunted tours 7 days a week.