During the late nineteenth and early twentieth centuries, the Hot Springs Domain at Te Aroha was the most popular geothermal resort in New Zealand. The Domain was initially established as a reserve in 1881, incorporating an area of 9.1 hectares (20 acres) on the lower slopes of Mount Te Aroha. The many hot springs in this area lay within the traditional territory of Ngati Rahiri, a hapu of Ngati Maru of Hauraki, and had long been frequented by Maori for their perceived healing qualities. By the late 1870s the site had become a popular destination for Pakeha visitors, with tourist numbers increasing after the discovery of gold on Mount Te Aroha in 1880 and the development of Te Aroha township as a mining settlement. The Domain was acquired by the government soon after the passing of the 1881 Thermal Springs District Act, with local Maori - who had played an instrumental role in initially promoting the resort - retaining the right of free access to the waters. The 1881 Act had been introduced to promote Crown ownership of New Zealand's thermal resources, partly in response to their increasing purchase and commercial exploitation by private entrepreneurs.

The earliest permanent buildings in the Domain were erected soon after the reserve was brought under the Public Domains Act in 1882, and were overseen by the Te Aroha Hot Springs Board. By 1887, there were seven bath houses and a drinking fountain, with extensive grounds laid out to plans drawn up by Henry Crump, a local engineer and architect. Government money largely financed the development of the facilities, as well as the establishment of a railway from Auckland in 1886. As the centrepiece of the now-burgeoning town of Te Aroha, the spa became the first geothermal resort in the country to receive thousands of visitors on an annual basis. People came to bathe or ingest its waters for health reasons, but also to promenade, listen to music or play genteel forms of sport such as tennis, croquet and bowls. Spas had important associations in nineteenth-century European society as places where the well-to-do could relax and congregate in refined and beautiful surroundings.

Although the health and leisure aspects of the reserve were heavily promoted when it was taken over by the Department of Tourism and Health Resorts in 1903, the facilities went into a slow decline after government funding and visitor attention were steadily drawn to Rotorua. The Domain nevertheless remained an extremely popular destination until after the First World War (1914-1918), and continued in a reduced capacity as a spa thereafter. Following closure of many of its facilities in the 1950s and 1960s, the Domain was transferred to the control of the local council (now Matamata-Piako District Council) in 1979, while formally remaining in Crown ownership.

The No.2 Bath House is one of only two surviving buildings in the Domain probably dating from the 1880s. The existing structure, constructed in 1886 however, is not the first bath house on the site. The spring was probably used prior to the 1880s by both Maori and Pakeha residents, as well as visitors to the area. The first known attempt to construct a bath at the spring was in the early 1880s, when the wife of the proprietor of the Hot Springs Hotel, a Mrs O'Halloran, donated a piano case to sink in a hole excavated at the top of the spring. By 1883 a temporary bath house had been constructed, which was accessible for a small charge. It may have been remodelled or rebuilt later in the year, possibly to plans by Thomas Mahoney of Auckland. Immersion in the baths associated with the No.2 spring - one of the hottest in the Domain - gained a reputation as an effective treatment for rheumatism and related ailments. A large entourage accompanying the visit of King Tawhiao (?-1894) in 1885 is said to have bathed in its waters.

The increasing popularity of the bath led to plans for a new building. Tenders for this were received in February 1886. A contract was awarded to F. Booth to erect a simple wooden structure, which may have incorporated the 1883 pool as well as a new bath. The architect is uncertain, although Henry Crump had been commissioned to prepare plans for a plunge bath in the previous year. This structure forms the nucleus of the present bath house.

Alterations to the new building were carried out in 1898, when the timber sides of the northern pool were replaced with concrete under the supervision of the engineer Charles Vickerman. It is possible that the 1883 bath was covered over at this time and the two current rooms at the southern end of the building added. Further modifications were made in 1902, when the building was extended to its current size. This allowed steps to be incorporated into the existing pool at its northern end. The provision of improved access took place soon after a visit by Dr Arthur Wohlmann - appointed Government Balneologist in the same year - who subsequently noted that the bath was 'excellent...and popular'. Aspects of the building's design were made to be similar to the 1897-1898 Cadman Bath House in an attempt to provide some uniformity in the Domain building's visual presentation.

Both throughout the late 1800s and after the 1902 alterations, separate hours of use were in operation for men and women, an example of how medical treatment and recreation were conducted along gendered lines. By the 1940s, however, the building appears to have been reserved exclusively for men. In 1967-1968, the bath house reverted back to staggered openings for men and women due to the conversion of the No 1 Ladies Bath into a private general bath. More recently, mixed bathing has been allowed.

Although becoming increasingly run down during the course of the twentieth century, the building remained largely unaltered until the 1990s apart from minor repairs. Substantial conservation work was carried out in 1997, when the pool was incorporated into a concrete raft on which the timber superstructure now stands. Since the end of the 1990s the building has been attached to an outdoor pool complex constructed to its north and east. The building remains in use for recreation and medical treatment, taking most of its water from the Mokeno geyser rather than from the No.2 spring as it once did.