World War II

As early as the 1920s, aviators had used fields in the Albion Park area for pleasure flights and demonstrations. RAAF Albion Park was built in 1942 as a Royal Australian Air Force (RAAF) Operational Base during World War II on land compulsorily acquired by the Australian Government. The base was used to conduct pilot training and was considered an important strategic asset in the defence of the Illawarra, particularly the steelworks at Port Kembla. Decorated fighter ace Clive Caldwell, a local resident, received RAAF training at the airfield. A satellite airfield was constructed north of Cordeaux Dam to support operations at Albion Park.

Post War

Following the war, Trans Australia Airlines and Australian National Airways linked the airport with Canberra and Melbourne until 1950. From 1952, South Coast Airways operated a milk run between Sydney and Melbourne with intermediate stops in Wollongong (Albion Park), Bairnsdale and Sale. Ownership of the airfield was transferred to the Shellharbour Municipal Council in 1962. Queen Elizabeth II and Prince Philip, Duke of Edinburgh visited the airport during a 1970 tour of Australia. Also during the 1970s, Southbank Aviation introduced commuter services from Albion Park to Newcastle and Canberra. The company would later relocate operations to Sydney, but Shellharbour Airport remained an important facility for pilot training and aircraft maintenance into the 1980s.

In 1990, the first master plan was prepared for the Shellharbour Airport (then named Illawarra Regional Airport), providing a framework for future management and developments when Shellharbour City Council assumed full responsibility for the operation of the airport. Throughout the 1990s, development of facilities continued, including the construction of a new passenger terminal and upgrades to roads and navigation aids at the airport. Impulse Airlines operated to the airport from Melbourne and Newcastle until August 2000. In 2002, the Historical Aircraft Restoration Society began relocating their collection of aircraft to Shellharbour Airport from Bankstown Airport in Sydney. Their hangar was completed in 2005, along with several other major upgrades, including the strengthening and reconstruction of runway 16/34 with better lighting, enhanced security, and the opening of Shellharbour City's Light Aeronautics Industry Cluster. Coinciding with this upgrade was the commencement of QantasLink services to Melbourne, although these were discontinued in 2008. In 2019, it was renamed from Illawarra Regional Airport to its present name.

In 2019, Shellharbour City Council secured $15.97 million in NSW Government funding, matched by a $4.35 million council contribution, for a $20.35 million upgrade project completed in 2021. Works included runway overlays, runway lighting for 08/26, a new passenger terminal, additional aircraft parking and foundations for an aviation business park.