Designed by the architect William Howe Greene, and based on a proposal of Bishop Howley's, the tower was originally intended to be a much larger structure. Howley had envisioned a castle with battlemented towers at four corners and a larger tower in the centre surmounted by a statue of Cabot holding aloft a great light. As with many visions in that Cabot year, as with the most recent one, the reality of costs reduced the design to a single tower whose battlements were replaced by a plain parapet and whose turret is the lone acknowledgement of the more grandiose scheme. Yet, so trimmed, it is less a medieval pastiche and more a functional form. As such, it has become one of Newfoundland's national symbols.

In 1897 the cornerstone of Cabot Tower was laid by Bishop Howley. The tower was erected for a dual purpose, imperial and national: to Serve as a Perpetual Memorial of the 60th year of the glorious Reign of Victoria, Queen and Empress and in commemoration of the 400th anniversary of the discovery of Newfoundland by John Cabot. The general contractor for the project was the firm of Henry J. Thomas. The stonework was executed by Samuel Garrett, a master mason. The official opening of the tower took place on 20 June 1900.

Cabot Tower replaced a former signal tower on the site. In fact, it was this practical function which financed its construction. As early as 1702 reference is made to the sending of signals from Signal Hill. The most famous signal was received, not in the tower, but in a small room of an old hospital nearby on 12 December 1901. Fighting gale force winds, Guglielmo Marconi managed to fly a kite at a height of some 400 feet, and on 12 and 13 December, this aerial repeatedly picked up a predetermined signal, the letter "S", transmitted in Morse Code from Poldhu, Cornwall, England, a distance of nearly 2000 miles. From 1949 until 1958 the Canadian Department of Transport maintained a visual marine signal in the tower. Today the building houses exhibits on the history of communications. The CBC Trans-Canada Stereo Network was inaugurated here in 1975.

The Cabot Tower Restoration, Signal Hill, was given the Southcott Award in 1992. It was awarded to Parks Canada, Beaton Sheppard and Associates, architects, and the Newfoundland Historic Parks Association.