The present house was built for the 3rd Earl of Bute by the neoclassical architect Robert Adam. Work commenced in 1767. The original plan had been for a grand and magnificent new house. However, this plan was never fully executed and much of the work was a remodelling of the older house. Building work was interrupted by a fire in 1771, but by 1774 the house, though incomplete, was inhabited. Dr. Samuel Johnson visiting the house in 1781 is quoted as saying, "This is one of the places I do not regret coming to see....in the house magnificence is not sacrificed to convenience, nor convenience to magnificence".
Luton Hoo was one of the largest houses for which Adam was wholly responsible. While Adam was working on the mansion the landscape gardener Capability Brown was enlarging and redesigning the park; formerly approximately 300 acres (1.2 km²) it was now enlarged to 1,200 acres (4.9 km²). Brown dammed the River Lea to form two lakes, one of which is 60 acres (240,000 m²) in size. In the early 20th century, part of the park overlooked by the south-west facade mansion was transformed into formal gardens.
In 1843 a devastating fire occurred and much of the house and its contents were destroyed. Following the fire the house remained a burnt shell until the estate was sold in 1848 to John Leigh, a Liverpool solicitor and property speculator. He rebuilt the derelict shell in the style and manner of Smirke, rather than to Adam's earlier plan. The Leigh family continued to own Luton Hoo until 1903, when on the death of John Leigh's daughter-in-law, who had late in life married Christian de Falbe, the Danish ambassador to England, the estate was sold to the diamond magnate, Sir Julius Wernher.
In around 1863 there was found a Hoard of Roman Coins found near Luton, Beds., on the estate of John Shaw Leigh, Esq., of Luton Hoo. The coins, which must have been nearly a thousand in number, had been deposited in an imperfectly burnt urn composed of clay and pounded shell, and consisted of denarii and small brass, ranging from the time of Caracalla to that of Claudius Gothicus.
The lavish redesigning of the interior in the belle epoque style resulted in a magnificent backdrop for Wernher' acclaimed art collection. The marble-walled dining room was designed to display Beauvais tapestries, while the newly installed curved, marble staircase surrounded Bergonzoli's statue "The Love of Angels". At the centre of the house the massive Blue hall displayed further tapestries, Louis XV furniture, and Sèvres porcelain. Sir Julius Wernher's widow, later Lady Ludlow, added her collection of English porcelain to the treasures of the house.
The Wernhers' great art collection, equal to that of their neighbours in nearby Buckinghamshire, the Rothschilds', was later further enhanced by the marriage of Julius Wernher's son Harold Augustus Wernher to Anastasia Romanov, a member of the former Russian Imperial family, generally known as "Lady Zia". She brought to the collection an incomparable assembly of renaissance enamels and Russian artefacts, including works by the Russian Imperial court jeweller Peter Carl Fabergé. For many years the collection and house were open to the public. Many of the Fabergé items were, however, stolen in the 1990s.
Following Lady Zia's death in 1977, the estate passed to her grandson Nicholas Harold Phillips, whose untimely death in 1991 caused the sale of the estate. The priceless collection is now on permanent display at Ranger's House in London. In 1997 the grounds were rented out for that year's Tribal Gathering dance music festival, and again in 2005 (although the latter event was cancelled due to the 7 July 2005 London bombings).