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In 1868, the Freedman's Bureau acquired land known as Howard's Grove, (or Howard Grove), located one half mile east of the city of Richmond, on the Mechanicsville Turnpike, in Henrico County. Through a lease from Mr. Bacon Tait (or Tate), the Bureau renovated several barrack-type structures that had been used as a Confederate hospital during the Civil War. The new facility became known as "Howard's Grove Freedman's Hospital."

The hospital was turned over to the state in December 1869 by way of General Order Number 136 issued by Major General Canby, Military Governor of Virginia. Beginning January 1, 1870 all African American patients at Eastern Lunatic Asylum in Williamsburg, (the only state institution at the time to accept black patients), as well as all jailed black lunatics from across Virginia, were to be removed to Howard's Grove for treatment. The General Assembly passed legislation in June 1870 renaming the facility "Central Lunatic Asylum" and designating it the official "reception and treatment facility for colored persons of unsound mind." This legislation was enacted with the stipulation that the Howard's Grove location was to be temporary.

Many patients arrived at Howard's Grove by way of civil commitments made by local judges at the request of friends and family. Other patients were removed from local jails and criminally committed. The asylum was overseen by a superintendent who answered to the Court of Directors. As with other state institutions, physicians, nurses and matrons were employed to care for patients. The buildings at Howard's Grove during the period of 1870 to 1885 were described as being of plain, if not crude, wood construction. They were divided into sections according to the patient's particular ailment or behavior. Residents were fed in their cells, as no dining facility existed at that time. There was no sewage system, and light was supplied by kerosene lamps and candles.

In order to enlarge the institution and alleviate the poor living conditions, a 300 acre tract of land was purchased in March 1882 by the City of Petersburg and given to the state for the purpose of constructing a permanent mental health facility for African Americans. According to the Acts of Assembly, the new hospital was built on land previously known as Hare's Farm or New Market, on the outskirts of Petersburg, in Prince George County. This information is disputed by William Drewry, a former superintendent and institutional historian who contends that the site chosen was actually the Mayfield farm in Dinwiddie County. The historical marker placed at the site also states that the hospital is located on the grounds of the former Mayfield Plantation.

Construction of the new facility near Petersburg was completed in early spring 1885. Additional tracts of land were purchased and new buildings were constructed regularly thereafter, as the number of patients increased. The new construction later included a special building to house the criminally insane apart from the rest of the hospital population. This section of the campus would later be referred to as the Forensic Mental Health Unit. An early institutional history notes that treatment at Central Lunatic Asylum during the 1890s was humane and emphasized the value of work and the benefits of recreation. However, practices at the facility also included seclusion, mechanical restraints, and the administering of hypnotics.

In 1894, Central Lunatic Asylum was officially renamed Central State Hospital. This piece of legislation also altered the names of the other mental health facilities in Virginia in and atttempt to inspire a more positive image of the institutions, and of mental health treatment in general. It is important to note that another state institution located in Staunton, Virginia went by the name Central Lunatic Asylum between the years of 1861 and 1865. Its name was later changed to Western Lunatic Asylum, and is a separate facility with no connection to the Richmond/Petersburg hospital for African Americans.

Following the trend to separate patients based on illness and behavior, the General Assembly authorized the establishment of a colony for feeble-minded people in March 1938. The act established the colony as a state institution separate from Central State Hospital, though still located on the same grounds. Known as the Petersburg State Colony, the new facility was given land located in Prince George County (later partly in Dinwiddie County as well), and assigned the task of admitting mostly younger patients with the propensity for academic and vocational training and future employment. Through a 1954 Act of Assembly, the Petersburg State Colony was renamed the Petersburg Training School and Hospital. The name was changed again in 1971 to the Southside Virginia Training Center. The facility moved from its original buildings in the early 1960s, but still remains part of the Central State Hospital campus. It continues to specialize in providing services for Virginians with various levels of mental retardation. As a side note, in 1960 the land and structures formally known as the Petersburg Training School and Hospital were transferred to the College of William and Mary for the establishment of a two-year branch campus. In 1961, Richard Bland College opened its doors to students. The original hospital buildings remained, but were converted into classrooms and offices, many of which are still in use.

In later years, the burgeoning patient population at Central State Hospital began to outgrow all the additions and improvements made over the preceding decades. The average resident population in 1948 was nearly 4,00, with overcrowding serving as the hospital's biggest obstacle. By 1950, the ward known as East View reportedly housed more than 300 patients in one large room. In the Criminal Building, conditions were so cramped that patients slept on the floor. As a result of the overcrowding, several new buildings were constructed during the 1950s and 1960s to house patients more comfortably, and in settings more conducive to the treatment of specific illnesses and age groups. During this period the hospital enhanced its services to include substance abuse recovery programs and specialized geriatric treatment.

The Civil Rights Act of 1964 radically changed the face of Central State Hospital. This piece of federal legislation forced the Commonwealth of Virginia to desegregate public facilities and provide equal services to all residents. For the first time in its nearly 100 year history, Central State Hospital opened its doors to individuals of every race. By the early 1990s the racial make-up of the institution was split almost evenly between whites and blacks with 49.8% of patients classified as "white," 49.2% classified as "black," and 1% as "other."

Central State Hospital still operates as a state-run institution in the same general location as it did in 1885. Though its clientele, medical practices, and appearance have changed over time, the mission of Central State Hospital remains much the same: "to provide state of the art mental health care and treatment to forensic and civilly committed patients" in central Virginia.

Central State Hospital has fallen under the heading of many different departments since its establishment. Over the years it has been controlled by the Court of Directors (later called the State Hospital Board), the Department of Mental Hygiene and Hospitals, the Department of Mental Health and Hygiene, and the Department of Mental Health and Mental Retardation. Currently, the hospital falls under the jurisdiction of the Department of Mental Health, Mental Retardation and Substance Abuse Services.