A theatre has stood on this site since the 17th century. Known as Gibbon's Tennis Court, or the Vere Street Theatre.The building was finally destroyed by fire in 1809.

At the beginning of the 20th century Oscar Hammerstein I commissioned Bertie Crewe, to build a new theatre in the Beaux-Arts style. The theatre opened on November 13, 1911 as the London Opera House with a capacity of 2,660. From 1914-15, it was called the National Theatre of England, until it was purchased by Oswald Stoll in 1916 and renamed the Stoll Theatre and, for a time, as the Stoll Picture Theatre, housing cine variety until the 1950s. Rose Marie played at the Stoll Theatre in 1942, followed by Kismet, Porgy and Bess and Stars on Ice in 1947. Joan of Arc at the Stake was produced in 1954. The theatre closed in 1957 and was demolished.
 
The present, smaller theatre was built in 1960 on the basement level of an office building and named the Royalty. It was the first West End theatre to be built since the Saville Theatre in 1931. Initially it served as a cinema and was then equipped for screening Cinerama films, becoming London's third Cinerama theatre.  In 1966, the house returned to live theatre use. The Royalty Theatre's only successes were a run of the hit Oh Calcutta and a hit production of Bubbling Brown Sugar in the late 1970s. Spectacular 'follies' style shows and 'drag' shows didn't find an audience, and the theatre became used as a TV studio for This is Your Life, but was later bought by the London School of Economics and renamed the Peacock Theatre.

The theatre is now shared between the London School of Economics (during the day) and Sadler's Wells evening dance productions. It is reputed to be haunted by an unknown actress of the former theatre.

Capacity: 999