Opened in 1875, it had previously served as a territorial correctional facility and then a Federal Bureau of Prisons facility. Americans sentenced to terms of imprisonment by the United States courts that operated in China in the late nineteenth and early twentieth centuries served their terms at McNeil Island. In the 1910s inmates included Robert Stroud, the "Birdman of Alcatraz", who fatally stabbed a prison guard in March 1916. During World War II, eighty-five Japanese Americans who had resisted the draft to protest their wartime confinement, including civil rights activist Gordon Hirabayashi, were sentenced to prison terms at McNeil; all were pardoned by President Harry S. Truman in 1947. Career criminal and novelist James Fogle was sent to McNeil at the age of 17 in the 1950s.
The state of Washington began to lease the facility from the federal government in 1981, and later that year the state department of corrections began moving prisoners into the facility, named "McNeil Island Corrections Center" by the department. The island was deeded to the state government in 1984.
In November 2010, the department announced its plans to close the penitentiary by 2011 and saving $14 million in the process.