In 1889 the Texas legislature passed a bill establishing a state mental institution to serve Southwest Texas. The new facility was to occupy at least 640 acres and be capable of housing 500 patients. It was to be known as the Southwestern Insane Asylum (not the Southwestern Lunatic Asylum, as it has sometimes been called). A site was selected just south of San Antonio, and the new facility began operation on April 6, 1892. In 1925 the word "hospital" was substituted for "asylum" in state asylums, and such adjectives as "insane" and "lunatic" were dropped from their names; the Southwestern Insane Asylum then became the San Antonio State Hospital. In the first eight months of operation the patient population grew to 142. By August 23, 1894, there were 225 patients. Provisions for 300 more patients were authorized when $70,000 was appropriated in 1898, and in 1910, $100,000 was voted for expansion. By 1912 the facilities could accommodate 1,140, and improvements were valued at $500,000. By 1915 the hospital's capacity was 1,800. In 1917 a training school for nurses in psychiatry was begun. This school, the only one of its kind in the state system, continued with a three-year course until 1942. In 1926 the average number of inmates stood at 2,103; the superintendent reported the hospital full and emphasized the need for additional facilities. A social service department was added in 1926, and occupational therapy was expanded. By 1932 the population had increased to 2,308, and crowded conditions were again reported in 1934. Five new buildings were completed by 1939; together with a nurses' home they enabled the hospital to provide complete modern treatment for patients. By 1940 the population was 2,854, and the hospital was crowded to capacity. Patients had to be refused admission for lack of bed space, and a waiting list of over 700 occupied the jails of the state. The onset of World War II blocked a construction program, but the Board of Control was able to get all patients hospitalized by June 1943. The average daily population of the hospital in 1945 was 2,732; employees numbered 450. Only White patients were admitted. Through the years the hospital grew at a steady pace, so that by 1960 the patient population was several thousand. By then the hospital was not only badly overcrowded but faced with the problems of low budgets, antiquated buildings, and an unacceptable staff-to-patient ratio. Some of the elderly patients were maintained in private nursing homes on a furlough basis. Daily census of hospital patients in 1967 averaged 2,700. Finally, as the result of a class-action suit originally filed against Terrell State Hospital, SASH came under federal court orders to reduce the patient population and increase the staff-to-patient ratio.
Racial desegregation at the hospital began in 1964 with the admission of the first Black patient. The first Black professional staff person was Helen Cloud Austin, who was unable to get a job at SASH in 1962 because of race but persisted in her efforts and became a case worker in 1964, opening the way for other Black professionals. In 1970 San Antonio State Hospital was accredited by the Joint Commission on Accreditation of Hospitals. The hospital also qualified for Medicare and Medicaid benefits from the United States Department of Health, Education, and Welfare by adding to the nursing staff. The average daily census was 1,836, and outreach clinics operated in Eagle Pass, Sinton, Beeville, and Bay City. SASH established a separate unit to treat drug addicts and expanded the alcohol treatment program. In the 1970s SASH was greatly improved by an extensive building program. The antiquated old main building and its adjoining wards were replaced by a modern administration building and a number of new ward buildings. Other improvements, which included new dining facilities and a media center, were funded partly by the state and partly by private individuals. Perhaps the most notable was the Transitional Living Unit, which was largely funded by the family of Mrs. Patric Sexton Dennis. Another was the All Faiths Chapel, which was financed by private funds and was strongly supported by Mrs. Enrico Liberto.
By 1990 the average number of patients had been reduced to 531 and the staff increased to 1,350. In 1992, 489 patients were served by 1,600 staff members. Centennial celebration events were held throughout April 1992. One of the highlights was the meeting of the American Board of Psychiatry and Neurology on April 6 to give board examinations to ninety-six psychiatrists, a significant honor for the institution. Dr. Steven B. Schnee, the superintendent in 1994, arrived in 1987. During his tenure the Texas legislature made a $2 million appropriation for SASH to establish a clinical research unit to seek new methods of diagnosis and treatment for chronically mentally ill persons. The program was a joint effort with the psychiatry and pharmacology departments of the University of Texas Health Science Center at San Antonio and the School of Pharmacy of the University of Texas at Austin. In the 1990s San Antonio State Hospital also operated acute care, extended care, multiple disability, psychiatric intensive care, adolescent, bicultural, geriatric care, and chemical dependency units.