Sheep farming for wool (and later meat), the agricultural industry for which New Zealand is best known, began with the importation of a small flock of Merinos to Mana Island in 1834. During the 1850s, the development of large-scale pastoralism took place, particularly in the South Island where runs of 20,000 acres were not uncommon. By 1861, there were 2,761,000 sheep in New Zealand.

The woolshed was the largest and most characteristic of New Zealand farm buildings. This was where sheep were kept under cover prior to shearing; where the shearing took place; and where the fleeces were sorted, baled, and stored until transport was available to take the clip to the main towns. Woolsheds varied in size from relatively small to huge structures with as many as 48 stands. The most common constructional material was timber or corrugated iron. Until the 1890s, shearing was a laborious process carried out by hand, using blade shears. From 1889 mechanically powered machines began to take over, to be succeeded in the twentieth century by electrically driven shears.

Arowhenua Station was the second run taken up in South Canterbury. Originally consisting of 31,000 acres, it was taken up by Major Alfred Hornbrook in 1853, and managed by his brother William for 10 years. The 20 stand station woolshed is thought to have been constructed as early as 1853 but was certainly there by 1854. In 1857, as there were no suitable buildings in the area, the woolshed was the site of the first Anglican service in South Canterbury. This was conducted by Bishop Harper, who also conducted a service there in 1859.

In 1863 the station was sold to Alfred Cox, then in 1878 to J. T. Ford and Co, from whom it was taken over in 1883 by the Bank of New Zealand. The bank's estate company assumed control in 1890, subdividing the station in 1897. The homestead block containing the woolshed was drawn in ballot by Robert McCallum, who in turn sold the block to John Lyon in 1919. Mrs Lyon, a family member, still owns and lives on the property, but the land is leased to an adjoining farmer. Use of the woolshed ceased during the 1980s.

A 'dignified, weathered old building' (Wilson: 1991, p 22), the Arowhenua woolshed is one of the oldest woolsheds in the country, and may well also be the oldest remaining woolshed. Other venerable wooden woolsheds in South Canterbury include that at Anamo (1854), near Mt. Somers in Mid-Canterbury; Te Waimate (1856) in South Canterbury; and Coldstream (1856) at Rangitata Mouth.