The original Mount Gambier aerodrome was established when Mr H.S. (Stan) May and Mr S.C. Davis purchased land directly opposite the present airport on the Riddoch Highway. An aerodrome was established and basic infrastructure provided with the aerodrome officially opened on 21 May 1930. Scheduled airline services to Adelaide and Melbourne began the same year. The aerodrome owners then purchased 82 hectares of land that was part of 'Croyle Estate' and then another 66 hectares of the same property on 2 June 1936. This site is where the airport is today. A licence was granted by the then-Civil Aviation Branch of the Department of Defence on 1 July 1936 and the new airport began hosting regular public transport flights.

In July 1939, the Federal Government purchased the aerodrome from its civilian owners and commenced the construction of a Royal Australian Air Force base which was to house the No. 2 Air Observers School (2AOS). It was officially formed on 6 February 1941 and the first intake of trainees began on 6 March 1941.

The school had its own ambulance, hospital, butcher, gymnasium and even cinema and at its peak was home to over 1000 personnel. It was eventually disbanded in January 1946 after training over 4000 Air Observers, Navigators and Wireless Operators, of which many served with RAF Bomber Command over Germany, Atlantic Ocean, the Middle East and South East Asia. 2AOS also conducted coastal surveillance operations in the South East of South Australia, reporting a number of submarine sightings.

On 29 May 1947, the airport was handed over to the Department of Civil Aviation and this saw the return of regular public transport flights to the region with Ansett Airways announcing that a daily service would operate between Mount Gambier and Melbourne. In July 1947, the Mount Gambier Gliding Club was formed and over the next 40 years the airport continued to prosper as a critical port for flights from Adelaide and Melbourne.