After the building work began, it was decided to change the concert hall into a theatre. The composers' names, which line the tiled staircases, were retained and can still be seen. The redesign placed the large Criterion Restaurant and dining rooms above the theatre, with a ballroom on the top floor.
When Spiers and Pond applied for a licence to operate, the authorities were unhappy because the theatre was underground and lit by gas, creating the risk of toxic fumes. The Metropolitan Board of Works had to vote twice before the necessary licence was issued, and fresh air had to pumped into the auditorium to prevent the audience from being asphyxiated. It was not until October 1881, at the Savoy, that the first theatre was lit electrically.
The building was completed in 1873 with the interior decoration carried out by Simpson and Son.
Charles Wyndham became the manager and lessee in 1875 and under his management The Criterion became one of the leading light comedy houses in London. The first production under the manager was The Great Divorce Case, opening on 15th April 1876. When Wyndham left in 1899 to open his own theatre, The Wyndham's Theatre (and then the New Theatre, now called the Noel Coward Theatre, in 1903) he remained the lessee bringing in various managements and their companies.
In March 1883 the theatre closed for alterations demanded by the Metropolitan Board of Works. The pumping of fresh air into the ten year-old auditorium, some thirty feet below street level, was deemed unsatisfactory. Thomas Verity supervised the alterations (Verity by now had also designed the Comedy Theatre in 1881 and The Empire Theatre in 1882). The new direct access ventilation shaft meant cutting off a considerable portion of the adjoining Criterion Restaurant. New corridors were built, with several new exits. The auditorium was reconstructed and the stage re-equipped. The old dressing rooms were demolished and new ones built. Most importantly, electricity was installed. Dramatic Notes (1884) states The Criterion Theatre, transformed from a stuffy band-box to a convenient, handsome, and well ventilated house, reopened on April 16th". Further alterations and redecorations took place in 1902-03, when the theatre was closed for seven months.
During World War II, The Criterion was requisitioned by the BBC - as an underground theatre it made an ideal studio safe from the London blitz - and light entertainment programmes were both recorded and broadcast live. After the war, The Criterion repertoire included avant-garde works such as Samuel Beckett's Waiting for Godot and pieces by Anouilh, Dario Fo and others.
In the 1970s the Criterion site was proposed for redevelopment, which caused protest as people feared the theatre would be lost. In February 1975 the GLC Planning Committee approved the development on the condition that the theatre continued in full, continuous and uninterrupted use while the redevelopments took place. Throughout the 1970s and early 1980s the row increased and the Equity Save London's Theatre Committee organised high profile demonstrations (campaigners included John Gielgud, Edward Woodward, Diana Rigg, Robert Morley and Prunella Scales) as they feared that the theatre would still be lost.
In the 1980s, the theatre building was purchased by Robert Bourne, a property tycoon and patron of the arts, and his wife, theatre impresario Sally Greene. The couple set up the Criterion Theatre Trust, a registered charity created to protect the Criterion's future. From April 1989 to October 1992 the theatre was closed whilst it underwent major renovations both in the back and front of the house. During that time, the block that exists today was built around it. After the refurbishment, the Criterion retains a well-preserved Victorian auditorium with an intimate atmosphere.
The theatre was used to hold the first round of recalls for successful auditionees in ITV's Pop Idol
The Criterion's current production is The 39 Steps adapted for the stage by Patrick Barlow from John Buchan's novel, filmed by Alfred Hitchcock in 1935.