The earliest record of Armley Mills dates from the middle of the sixteenth century when local clothier Richard Booth leased 'Armley Millnes' from Henry Saville. A document of 1707 describes them as fulling mills. One contained two wheels and four fulling stocks, while another was used to grind corn mill and two fulling stocks'. The mills expanded and by 1788 were equipped with five waterwheels driving eighteen fulling stocks.Fulling was a necessary but dirty process where woven wool is felted. The bundles of cloth are hit repeatedly by large hammers, the fulling stocks, while soaked in water, urine and a clay known as Fuller's earth. The urine which is a source of ammonia was collected from neighbouring houses, who specially saved it for the purpose.
The mills were sold in 1788, ten years after the new canal opened. It was bought by Colonel Thomas Lloyd, a Leeds cloth merchant who expanded it to be the world's largest woollen mill, he leased the running of the mills to Israel and John Burrows, They built demi-detached house for themselves on the far bank of the canal.
In 1804/1805 the mills were sold to Benjamin Gott- but burnt down. The early mills were fire hazards, the fibres in the air igniting and setting fire to the flammable structure. Gott rebuilt the mill using fireproof principles: the mill structure survives and it is this structure that has achieved a grade II* listing. Gott was the owner of several woollen mills. He died in 1840 and was succeeded by his sons John Gott and William Gott. They introduced a steam engine to supplement the water wheels in 1850 but it was in the 1860s that the waterwheels were phased out.
By 1907 part of mill had been let out to tenants in a room and power agreement. The woollen clothing manufacturers Bentley and Tempest took over the mill. The mill closed in 1971, a victim to the changing technology, loss of market and the prevailing economic conditions. It was sold to Leeds City Council who re-opened it as a museum of industry in 1982.
The museum suffered damage in the 2016 Boxing day flood but has since reopened.