The estate in which the Hydropathic's building lies was sold in 1773 to Alexander Munro, who was first of three generations to be Professor of Anatomy at the University of Edinburgh. It stayed in the Munro family for more than a hundred years. In 1877, the estate became the property of the Craiglockhart Hydropathic Company, who set about building a hydropathic institute. Such was Craiglockhart's function until the advent of the First World War. Between 1916 and 1919 the building was used as a military psychiatric hospital for the treatment of shell-shocked officers.
Probably the most famous inmates of Craiglockhart were the poets, Siegfried Sassoon and Wilfred Owen, whose poems appeared in the hospital's own magazine called The Hydra. The best known of the doctors assigned there was W. H. R. Rivers. The Hospital featured in the 1991 book Regeneration by Pat Barker – and the 1997 film of the same name – and in which the institution was known as Craiglockhart War Hospital.
The building then became a convent for the Society of the Sacred Heart, before serving as a Catholic teacher training college. It then passed to the then Napier College. It is now a part of Napier University. Much of the old building has been retained, but an extensive new wing has been built behind it to house the Business School.