The Capitol Theatre was built as the Allen Theatre on Jasper Avenue, Edmonton in 1918. The Allen Theatre occupied the site of the Orpheum, a previous theatre that was built in 1907 as a vaudeville theatre and then switched to a movie theatre in 1909. The Allen was bought by Famous Players in 1923 and renamed the Capitol Theatre.

The Capitol Theatre was restored in 1929 and the owners used the opportunity to install sound equipment and the first sound film to play in Edmonton, Mother Knows Best, had its debut at the Capitol on March 27, 1929. The renovations also included new projectors, electrical wiring, a balcony with two stairwells, new furnishings, and decorative molding with gold leaf.

The Capitol Theatre underwent a second renovation in 1938. This renovation included the façade of the building, which now featured an elaborate marquee that used 2,000 sixty-watt light bulbs and was reportedly the largest such theatre marquee in the British Empire.

Theatre attendance in Edmonton began to drop in the 1950s and many of the movie palaces such as the Capitol began to struggle. By the 1970s, elaborate theatres in the downtown core were no longer feasible and the Capitol Theatre was demolished in 1972.

In 2011, a replica of the Capitol Theatre as it appeared in 1929 was completed at Fort Edmonton Park. The New Capitol Theatre is currently in use as a venue for films and live theatre.