Ship building was introduced on a large scale to Port Arthur in 1834 as a way of providing selected convicts with a useful skill they could take with them once freed. Only those convicts deemed well-behaved and receptive to training were allowed to work at the dockyard. Up to 70 convicts were employed at the yard at its height, with the majority engaged in the menial task of cutting and carrying timber. The remaining convicts were the carpenters, blacksmiths, caulkers, coopers and shipwrights who actually built the vessels.
Fifteen large ships and over 140 smaller vessels (from whale boats, to rowboats and punts) were launched from the two slipways. These ships were known for their craftsmanship and durability, with one, the 270-ton Lady Franklin, enjoying over 40 years of service. The hull for a steamer, the Derwent, was even constructed at the Port Arthur dockyards. The yard was also used as a regular servicing lay-by for ships plying the busy east coast route, vessels often hauling in for refit and repair.
Though successful, the ship building operations at Port Arthur ceased on a large scale in 1848. A growing colonial economy, recovering after a severe depression in the early 1840s, meant that private ship builders did not want to compete against a government yard producing ships at a cheaper rate and lobbied for its closure.
Today the site of the dockyards is a short walk from the main settlement. The original Master Shipwright's residence still stands, as does one of the original slipways. A later building, the Clerk of Works' residence, also stands on the location of one of the original dockyard sawpits and a later blacksmith.