The Buffalo Memorial Auditorium began as a public works project to replace an aging civic auditorium (Buffalo Broadway Auditorium c. 1898, now a highway department garage known as the "Broadway Barns") and the recently collapsed Peace Bridge Arena across the border in Fort Erie. In June 1938, city officials sent a loan and grant application to the WPA for funds to build the new structure. The approval of the $1.2 million grant was announced in Washington D.C. on October 7, 1938, and construction began on November 30, 1939. The arena was built on the junction of the old Erie Canal and Main-Hamburg Canal.
The Auditorium's construction brought a great deal of activity to downtown Buffalo. On December 31, 1939, Buffalo Evening News reporter Nat Gorham wrote:
"As if overnight the Terrace once more is coming back to life. The massive new hall will be the mainstay, but city planners also want to improve the section with a boulevard in the old canal bend, waterfront parks and relocation, if not removal, of the New York Central tracks. Visible proof of these good intentions is construction of the new hall, which is being watched daily by hundreds of citizens". —Nat Gorham