The theatre was built in 1927 at the cost of $2 million, and was designed by architect Herbert J. Krapp; it was named after the 19th century actor Edwin Forrest, who was born in Philadelphia, and owned and lived in the Edwin Forrest House. The opening performance was The Red Robe in 1928. A renovation of the theatre was undertaken in 1997, including redecoration and the addition of handicapped-accessible restrooms.
Over the years, the Forrest Theatre has been a proving ground for various Broadway plays and musicals, serving as the location for previews of these productions. Some of the shows that played at the Forrest prior to moving to Broadway include The Music Man (1957), Funny Girl (1963), Golden Rainbow (1967) and Chicago (1975).