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The National Park system expanded greatly in 1920s. National Park Service (NPS) administrators Stephen Mather (1867-1930) and Horace Albright (1890-1987) chose to erect new hotels in many national parks to facilitate tourism and encourage public appreciation of the parks. Yosemite was considered the crown jewel of this system, and it was decided by the mid-1920s to build a luxury hotel here. The U.S. Secretary of the Interior Hubert Work (1860-1942), Mather, Albright and the President of the newly formed Yosemite Park and Curry Company, Donald Tresidder (1894-1948), chose the hotel's location in 04/1925. They selected the former town site of Kenneyville, CA, a hamlet whose buildings could be re-used to house construction workers for the new hotel. The architect Gilbert Stanley Underwood gained the commission for the Ahwahnee Hotel in 07/1925, largely as a result of his National Park Service connections. Underwood had just previously designed the Zion National Park Lodge #1 and the Bryce Canyon National Park Lodge in 1924-1925. The Ahwahnee's construction proved to be a huge logistics effort, with 5,000 tons of stone, 1,000 tons of steel, and 30,000 feet of timber carried by truck over treacherous mountain roads and paths. Underwood, whose office was in Los Angeles had to open a San Francisco branch in order to speed up the preparation of drawings and to improve supervision of the hotel during construction. Perry Gage, an architect in Underwood's employ, headed the new San Francisco office. Construction occurred between 08/01/1926-1927, at an extremely fast pace, the work being done by the company of James L. McLaughlin, a building contractor from San Francisco. Underwood would go one to obtain a great deal of Federal government work in the 1930s, designing federal courthouses, post offices and immigration facilities as well as the preliminary plan for the Timberline Lodge, Mount Hood, OR (1936-1938); later, he also designed the Jackson Lake Lodge in Grand Teton National Park, WY, (1950-1954). Jeannette D. Spencer, wife of the San Francisco architect, Eldridge Spencer, designed the stained glass in the Great Lounge of the Ahwahnee Hotel.

Listed on the National Register of Historic Places in 1977, level of significance: National. The Ahwahnee had a look of rusticity, but this effect was made possible by modern technologies. Concrete and steel formed the building's frame, like a contemporary skyscraper. In order to avoid fire, architect Gilbert Stanley Underwood employed concrete for the lodge's "log" structure; rough wooden forms were allowed to impart the texture of bark to the concrete, and the rustic wall surface was subsequently painted to resemble redwood. One of the architect's original directives was to make the hotel blend into its surroundings. He did this by using local many local materials and by keeping colors muted and natural. Underwood also emphasized views from the hotel by creating a Y-shaped plan; the 3 wings were angled to provide spectacular vistas. The original hotel contained 132,000 square feet and stood six stories tall. Subsequent additions to the plan added 18,000 square feet; complex logistic issues and design delays caused the original price tag for the Ahwahnee to rise from $525,000 to $1.5 million.

A suite of rooms on the Ahwahnee Hotel's sixth floor became occupied by Donald and Mary Curry Tresidder as their living quarters in 1928. This suite was remodeled again in 1970-1971 and c. 1981, the latter time in preparation for a visit by Queen Elizabeth II in 1983. The suite was named for Donald Tresidder, the Yosemite Park and Curry Company's first President. Roof trusses in the dining room required additional support soon after construction had completed. Reinforcement work occurred in late 1931, supervised by the Bay Area architect Eldridge (Ted) Spencer. The original porte cochere was enclosed and the interior space used as the "Indian Room." In 1943, the United States Navy took possession of the Ahwahnee for use as a convalescent hospital and made reversible changes to the building and its grounds. In 1977, the Music Corporation of America (MCA) became the new concessionaire for Yosemite National Park; MCA proposed a large-scale renovation of the aging hotel and commissioned San Francisco architect Walter Sontheimer to supervise the restoration effort.